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Old 25.03.2017, 21:02
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Repaying mortgage before expiry

Repaying mortgage before expiry date implies penalties. What seems odd to me is that those penalties are not specified in contract even for fixed mortgages (at least at couple of banks which I've asked). Does anyone know, how much could it be (expected interest payments or more)? Does it make sense to insist on including exact penalties to the contract, maybe involving legal insurance company and asking them to review the contract? Thanks
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Old 25.03.2017, 21:10
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Re: Repaying mortgage before expiry

It depends on how long the mortgage would still run. Can you fight that? Probably no. Can you ask nicely? Yes
Does it help to get a lawyer? No

No bank will specify what the exact amount is as this will often be related to interest rates and they tend to change
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Old 25.03.2017, 21:12
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Re: Repaying mortgage before expiry

Worst case all your remaining interest on the loan until the end of its term. Minus the interest they might theoretically obtain in current market by re-lending the money to someone else until the end of your term - but expect it to be on a very low side as usually they don't actually re-lend just like that. Plus possibly some admin fees, some contracts have fees for terminating the mortgage, even for normal timely end of contract.

Some have a fixed flat charge for early termination: e.g. hypomat.ch advertises 1000 CHF charge in case of a sale.
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Old 25.03.2017, 21:40
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Re: Repaying mortgage before expiry

You'll pay at least all the interest through the end of the loan. The contract cannot say nothing... it won't give you the exact amount. That will depend on time. But it should say what the penalty will be comprised of. Interest only? Fees? Penalties? Etc
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Old 25.03.2017, 21:42
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Re: Repaying mortgage before expiry

And get a clause in the contract that you can repay after a certain amount of years. Standard clause in Germany and I used that once there to repay the mortgage
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Old 25.03.2017, 22:22
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Re: Repaying mortgage before expiry

In practice, you'll speak with the bank to agree a way to terminate early. I don't know of a way you could unilaterally terminate the mortgage without the cooperation of the bank.
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Old 26.03.2017, 11:52
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Re: Repaying mortgage before expiry

The bank will give a mortgage on fixed terms, and the bank will arrange to borrow the same amount, at fixed terms, at a lower rate than they give you.

This difference is usually around 1% which is the banks' profit.

If you wish to terminate the mortgage half way through, under normal circumstances the bank make the calculation of principal x interest rate x N days left to run and charge you accordingly
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