Throughprompt repayment of loan, the borrower has the option to repay the loan given before its natural maturity. Loan can be repaid quickly Total hey partial: in the latter case, Borrower pays only a portion of the principal outstanding, What are the benefits of partially repaying the loan? Thanks to this operation, subsequent installments are reduced.
When a mortgage is signed, the date by which the loan must be repaid is also entered into the contract. However, on most occasions, the repayment schedule of the loan can be very long. It may happen that for any number of reasons – liquidation, inheritance or unexpected winnings – The borrower has the necessary funds to repay the loan in full or in part before the scheduled date, Let’s see how this opportunity, guaranteed by all contracts, works.
prompt repayment of loan
What is early repayment of loan? In short, it is an operation through which the borrower returns the remaining capital to the bank that granted the mortgage loan,
In general, the repayment time of a mortgage can be very long: the borrower, for one reason or another, may find himself in a liquidity position that would allow him to repay the mortgage loan ahead of schedule. it is possible included in all loan agreements,
However, it is necessary to distinguish between two different types of operation:
- total prompt repayment,
- partial prepayment,
Remember that mortgage is the contract through which one party orders lender Delivery to another, usually a bank or a financial company, is called Borrowera certain sum of money, which the payee undertakes to return according toArticle 1813 of the Civil Code,
The borrower is released from any obligation associated with the loan when he transfers to the lender a number of goods of the same kind and quality as the goods received. In essence, a mortgage is a consumer loan, as defined by economists Exchange between present money and promise of future money,
mortgage generally provides for a natural termination, borrower by a certain date Required to repay requested capital, What is received is reimbursed by way of payment of periodic instalments, though they are unitary in nature, It appears to consist of traditional interestspaid as consideration for the enjoyment of capital.
il loan amortization schedule – which is, in essence, the Capital Repayment Plan – is agreed between the bank and the customer,
Through prompt repayment of the loan, the customer returns to the bank that gave him the loan, All residual capital before the natural termination of the contract,
as we predicted,early repayment can be totalbut one is likely to executepartial prepaymentThrough which only and only a part of the residual capital is to be repaid: thanks to this operation, the subsequent installments can be reduced.
Since 2007, early repayment of the mortgage This no longer includes payment of finesHowever, it can be envisaged in the case of a mortgage loan or other type of financing.
Why do you need to pay off your mortgage early?
but why should you go ahead with itprompt repayment of loan, The goal of this operation is reduce or eliminate the amount of interest To repay which the bank will have to pay for the remaining capital.
In fact, it must be remembered that there is a provision for payment of loan amortization scheme capital share and one’s Rate of interest, which is the lender’s remuneration for the capital lent. By paying the principal in advance, you can reduce or eliminate the amount of interest you still have to pay.
have to pay a fine
Prompt repayment of loan is regulated by whom?Section 120 of the Consolidated Banking Act – Area, This special provision he provides no penalty expected For mortgages set out for the purchase of a first home commencing from the month of February 2007. There is also no possibility of penalty for mortgage loans granted for the purchase or renovation of immovable property units used as houses and for carrying on one’s economic activity or professional in a natural way. Person.
If the loan is signed before February 2007Early repayment provides for application of penalty, which is calculated as follows:
- variable rate mortgage: A maximum penalty of 0.50% is envisaged if the repayment is due before the third last year of amortization. decreases to 0.20% in the third to last year, with depreciation reduced to 0% in the last two years;
- fixed rate mortgage: If the contract was signed before January 1, 2001, the parameters are the same as for a variable rate mortgage. For contracts executed after this date, the penalty is equal to 1.90% if repayment occurs in the first half of the amortization period, 1.50% in the second half of the amortization period, 0.20% during the third last year of amortization and equal to the last year of amortization. Up to 0% over two years:
- mixed rate mortgage: Reference is made to the maximum limit mentioned above based on the type of rate applicable at the time of repayment.
When should you repay the loan?
A question that many people ask is whether it is really convenient to close the mortgage early. Before answering this doubt, we remind you that:
- il capital The payment we have to make to the bank is entirely part of the borrower’s asset, as it constitutes the amount used to buy the asset;
- interestsInstead, they make actual cost of credit, This is the money that is paid to the bank for lending money and it becomes a pure and simple expense.
Looking at these premises, the answer becomes almost obvious: Facilitate early repayment of the loan It is still conditioned by the amount of interest to be paid, In other words, the number of years it takes for the loan to naturally amortize.
Most Italian banks implement the so-called mortgage amortization schedule, which provides that the first installment consists mostly of the interest and less of the principal. As you progress, the interest rate decreases and the principal amount to be repaid increases. This means that almost all the interest is paid before the principal. In other words, if a mortgage is closed one year before its natural expiration, the operation doesn’t make sense financially. The more years it takes to repay the loan, the higher the ease of operation.
How to apply for early repayment
Borrower, who intends to repay the loan early, It has to apply to the issuing bankFor which it is necessary:
- communication l’iintention to finish early Own loan before closing of amortization plan:
- Ask Calculation of amount to be paid for prompt repayment;
- communicate intent to proceed with Filling Self-Certification FormTo which he must attach a copy of his identity document and tax code.
We recall that the law provides that the mortgage, which is registered as a guarantee of the loan, automatically terminates on the date of termination of the obligation without any charges for the debtor.