Has the monthly payment of your home not stopped you in recent years from creating a nice savings box? Then it is an option to repay your mortgage early. The fact that savings rates are currently very low is an additional argument.
But beware: There are various conditions attached to an accelerated repayment. Discover all the advantages and disadvantages here, so that you can make a well-considered decision.
Repay the mortgage early: the pros
If you have a substantial savings reserve and still have a long mortgage term, it is advisable to check with your lender for an early repayment. Here are the most important arguments:
With loans with a long term (20 years or more), an accelerated repayment of the capital will probably decrease the total interest charges of your mortgage.
If you pay off part of your loan early, the monthly repayment will go down. And so there is budget space again. Another option is to keep the monthly repayment the same and to shorten the term of your mortgage loan.
With an early repayment, depending on the age at revision
The premium for the outstanding balance insurance will also go down if you do not forget to inform the insurer.
with an accelerated repayment you have the option to continue the outstanding balance insurance. In this way, the outstanding balance insurance (for the duration of the original loan) automatically changes into pure death cover. If the insured person dies, the surviving dependents will receive the death capital, while the home loan will no longer have to be paid.
Repay the mortgage early: the cons
At the same time we want to point out that not every scenario benefits from early repayment:
- If you redeem your mortgage early, you risk falling without savings reserves. And that naturally entails financial risks. Make sure you always have enough savings to cover your daily expenses for a few months.
- Those who pay off their loans early may miss out on tax benefits.
- For the adjustment of your loan, the bank usually charges a reinvestment fee of 3 months interest.
Would you like more information about the consequences of an early repayment on your debt balance insurance? Feel free to contact us, we are ready for you!