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Is it worth overpaying your mortgage?

Many people are wondering-even hypothetically-about the viability of paying off the obligation ahead of time. In principle, there is such an option, but it is not always beneficial as much as it may seem.

Overpayment of the mortgage-what is it?

Overpayment of a mortgage is nothing more than a partial repayment of an obligation-at an earlier date than it follows from the schedule. The essence is to regulate a certain part of the capital, as a result of which the bank charges interest on a smaller amount.

It is worth noting that you can overpay any part of the obligation. However, in the context of profitability, it is best to pay the equivalent of at least one monthly instalment.

Do you have to pay for overpayment of the mortgage?

It turns out that the early repayment of part or all of the obligation may entail the need to incur additional costs? It still happens that the bank collects a fee for overpayment of the mortgage-especially if it occurs before the expiration of the term specified in the contract. This is usually a period of 3 years from the time the funding is taken.

It is worth noting that more and more banks are moving away from collecting commissions for early repayment of obligations. However, it is important to ensure that such fees do not actually apply-in order to avoid possible disappointment. You can check such information about your mortgage online – just use, for example, financial comparison sites.

Mortgage overpayment-when does it pay off?

It is difficult to answer this question unequivocally-it all depends on the individual financing conditions under the agreement. This means that it is always necessary to estimate the profitability of overpaying a mortgage.
This option is worth considering m.in. when:
● you want to shorten the financing period
● you want to reduce the amount of monthly payments.

It is worth noting that at the time of overpayment of the mortgage, the bank is obliged to cancel the interest and reduce the commission for the period by which the loan repayment period was shortened. In practice, this means that overpayment of the loan allows not only to reduce the monthly obligation, but also to recover some of the funds.

How much you actually manage to save is an individual matter. It all depends on how much you intend to overpay. On average, you can earn up to tens of thousands of gold.

At the same time, it should be borne in mind that in order for the overpayment of the mortgage to not entail any risk, the borrower must have surplus capital. This will not deprive him of his livelihood, which will avoid a sudden deterioration in the financial situation.

Are you going to overpay your mortgage? Keep that in mind.…

If the calculation you carried out showed the profitability of overpaying the mortgage, you need to remember a few things.

Of particular importance is the early repayment of smaller liabilities, e.g. cash loans, tax liabilities, debts to individuals, temporary loans. This is because they are obligations that entail much higher total costs. The exception is loans with RRSO at 0%.

In addition, you need to make sure that overpaying the mortgage in the amount you specify will contribute to a real reduction in the amount of the monthly installment. If you are going to pay only a small part of one monthly installment, such an action does not make much sense.

Remember! Before you start overpaying your mortgage, check to see if you need to inform the bank. It is often necessary to notify the financial institution of your decision-often in the form of a written order.

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