Many of the families who saved during the covid-19 pandemic will use that money to pay off their mortgages early; that is, to pay off all or part of your mortgage debt early. It is one of the forecasts published in the latest Economic Bulletin of the Bank of Spain, which confirms that more and more households use part of their savings for this purpose; mainly due to the increase in the cost of variable-rate mortgage loans caused by the rise in the Euribor.
According to the financial comparator HelpMyCash.com, paying part or all of the outstanding amount of an adjustable mortgage in advance can be very worthwhile in the current context of rising rates. Now, before carrying out this operation, it is convenient to know how the loan will be if only a fraction of the debt is repaid, what additional procedures must be carried out in case of definitively liquidating the credit and what will be the cost of the advance in both cases.
Let's say, for example, that a mortgage holder has saved a significant sum of money in recent years, but that amount is not enough to completely pay off his mortgage. In this case, you can carry out a partial repayment, that is, advance part of the outstanding capital to reduce your debt.
In this case, as there will be less money to return, the bank will give you two options: reduce the amount of your monthly payment, in which case the repayment period will be maintained, or shorten the repayment period, in which case the amount will be maintained. of the fee. According to HelpMyCash, the second option allows you to save more in the long run, since interest will be generated for less time and less will be paid for this concept.
However, reducing the monthly fee can also be a good option if the amount has skyrocketed due to the rise in Euribor and the client has certain problems reaching the end of the month. From the comparator, therefore, they recommend doing the math and assessing which alternative best suits the applicant's needs.
And what happens if the mortgaged person does have enough savings to pay off all his mortgage debt in advance? In this case, if you wish, you can carry out a total early repayment, that is, pay off your entire mortgage at once so as not to pay more installments. However, even if the loan is extinguished, it will still appear as a charge on the house in the Property Registry, so an additional procedure will have to be carried out to eliminate it completely.
This procedure, called registration cancellation of the mortgage, can be completed by the client on their own, going to the notary, the Treasury and the Property Registry, or they can entrust it to the bank or an independent agency. From HelpMyCash they advise against entrusting it to the bank, since it is the most expensive: on average, if the entity carries out the management, it will charge between 1,000 and 2,000 euros from the client.
On the other hand, if the client cancels the mortgage by registration on their own, they will save management costs and will pay, on average, about 600 euros. And if you entrust the process to an independent agency, the total bill will amount to approximately 800 euros. With the HelpMyCash cancellation fee simulator, you can calculate the price that would have to be paid based on the conditions of the settled loan.
From the comparator they also highlight that the bank cannot charge any commission to the client if the mortgage repaid early (in whole or in part) has a variable interest. This is stipulated in Royal Decree-Law 19/2022, which specifically prohibits applying this charge if the payment of a variable-rate mortgage loan is advanced during the year 2023.
On the other hand, if the payment of a fixed or mixed rate mortgage is advanced, the bank may charge the commission for total or partial early repayment indicated in the deed. Likewise, if the loan was contracted between December 9, 2007 and June 15, 2019, the interest rate risk commission may additionally be applied, the price of which must also be specified in the contract.
