Even if you have managed to save enough to cancel the mortgage and forget about the happy monthly payments of the loan before its maturity, it is convenient to sit down and consider whether or not to cancel the mortgage.
How many years have you been paying?
When it comes to analyzing whether or not it is interesting to cancel a loan in advance, the time we have been paying the mortgage has a lot to do with it. Although the mortgage payment seems the same to us every month and every year (except for variations linked to the interest rate in the case of a variable interest mortgage), the truth is that the composition of that quota varies greatly over time. In the first years, interest is mainly paid and very little capital borrowed, and the final stretch, practically only that borrowed capital is returned.
Partial amortization or pay the entire mortgage and cancel it?
On those occasions when it is not interesting to cancel the mortgage, perhaps to continue enjoying the tax relief In the case of having signed the mortgage before January 2013 or to avoid cancellation costs if we have already paid practically all the interest and only have borrowed capital left, perhaps a reasonable alternative is amortize part of the mortgage. In this case we can choose reduce fee every month and maintain the term, or maintain the mortgage payment that we pay every month and reduce credit life.
The bank’s commission for canceling the mortgage
It is also convenient to take into account the commissions that banks usually establish. The new one Mortgage law set maximum rates. In the case of the variable interest mortgage they are:
- If the refund is made in the first three years, the maximum commission is the 0.25% of the capital
- Between third and fifth year, the maximum commission is 0.15% of the repaid capital
- Past the first five years, the bank cannot charge a commission for early repayment.
On the contrary, if we are dealing with a fixed interest mortgage, the maximum cancellation commission is:
- Of a 2% of capital reimbursed in the 10 first years of life of the loan.
- Of 1.5% of capital from the 10 years.
Now these limits and maximum commissions They will only apply to loans signed after the regulations came into force.
“For contracts signed between December 9, 2007 and June 15, 2019” explica HelpMyCash, the commission will be “0.5% the first five years and 0.25% the following. At the same time, they can also charge us an interest rate risk commission if it appears in the contract, whose average cost is usually between 0.5% and 5% “. In the case of mortgage loans signed before December 9, 2007, the commission will be “up to 1%” says HelpMyCash.
The rest of the procedures … which also have a cost
Once we have deposited the money in the bank for the outstanding balance of the mortgage, we must ask for a certificate of zero debt, which certifies that the mortgage is canceled. This procedure has no cost, the bank cannot charge for this certificate. If you try to do so, you can appeal to the Bank of Spain.
Then you will have to do a Notarial document accredits the cancellation, with their corresponding notary fees, and take it to Property registration, which also has a cost.
As explains the financial services company FintonicIn total, between notary and registry, the cost will amount to 200 or 300 euros in total, depending on the cost of the loan.
Cancel the mortgage to sell the home
It is also common to cancel the mortgage in advance when we want to sell the home. In this case lThe cancellation of the debt occurs at the same time that the mortgage sale occurs. “Previously, you must request the bank for the pending debt certificate and, with the money from the sale of the house, proceed to cancel the mortgage” explica ING. “When this situation occurs, the normal thing is that the same notary who attests to the deed of sale is the one who drafts the mortgage cancellation deed, in order to certify that the home that is transferred does so free of charges”, adds the entity .
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