The average mortgage has terms for about 20 years, often for 25 years. The dream of each mortgage taker is an early repayment of the mortgage. Not to mention that to pay the bank the full amount of the mortgage one day and become a “full-fledged” homeowner.
As a rule, the financial ability to pay the mortgage before terms appears as soon as it remains to pay no more than 20-25% of the mortgage. It is far from a rare case when grown-up children need the help of parents on the issue of acquiring their own homes. Then one may forget about early repayment of the mortgage for a while.
Early repayment of mortgage vs mortgage agreement
If the mortgage taker is determined to repay the mortgage before term, he does not need to immediately “run” to the bank with an amount of money equivalent to the balance of the mortgage amount. The financial institution is entitled to demand that the mortgage taker must pay off the mortgage only in accordance with the agreement. It is no secret that such a service as “Early Repayment of a Mortgage” is not free, because the bank will not be able to receive payments for account maintenance, insurance and other services, the interest of payments which directly depend on the balance of the mortgage loan amount. At the same time, the amount of payments for banking services for early repayment of the mortgage is often differently amounted. It depends on the conditions under which the agreement was signed between the bank and the borrower.
Probably one needs to wait a bit with the early repayment of the mortgage?
In the near future, it is planned to make an accurate list of additional payments, which, in case of early repayment of the mortgage, can be withdrawn by Czech banks. Such measures are intended to resolve the difficult situation where banks may have provided customers with difficult legal information about the early repayment of the mortgage and the amount of commissions that are to be paid.
Today, to pay off a mortgage before term you need to pay tens of thousands of Czech national currency (CZK). What is the way out of this situation? If you have already taken a mortgage and want to repay it before term, it makes sense to wait until the Czech banks start working according to the new recommendations of the Czech National Bank. Those who are just planning to get a mortgage should literally do “proff-reading” of every clause of the mortgage agreement, and not just have an idea of the “interest rate”, which can be either floating or fixed.
What are the conditions for early repayment of a mortgage now?
As of March 2019, no additional payments and fines for early repayment of a mortgage is no more than 25% of the total amount of the mortgage with a fixed rate.
In the “Guide and tips” section you can read about all the issues related to the acquisition of real estate in the Czech Republic, to be aware of everything that is happening in the real estate market in the Czech Republic, Prague real estate, in particular.