It is not surprising then that many people are thinking about overpaying the mortgage to get rid of debt as soon as possible. However, is it profitable?
Overpayment and earlier repayment
Before we start thinking about whether the overpayment of the mortgage is profitable, it is worth paying attention to a cardinal mistake that many borrowers make, which gives up the fight for their money.
Overpayment of a loan is something other than its early repayment. In this case, we are talking about monthly installments larger than required by the contract or additional transfers to the bank account in which we have the loan, and not about the whole, one-time repayment of the debt that we have.
Watch out for the first three years of credit
The first three years in which we repay the liability are key to the profitability of overpayment of the mortgage. Especially when we have a loan with a variable interest rate. The bank has the right to impose a commission on us, which at the initial stage of paying off the liability can be really big and burdensome.
Rules for overpayment of the mortgage
Speaking about the overpayment of the mortgage, it is worth mentioning that the rules for this type of loan are defined by Polish law, which protects borrowers from charging additional fees. The provisions in this respect are clear – after three years of taking out a mortgage, banks are not entitled to impose on their clients additional costs associated with overpayment.
However, it is worth remembering that many issues related to mortgage repayment are regulated by the contract. It happens that the banks agree to overpayment only in a specific part. A thorough check of the contract is therefore crucial both when taking out a loan and if you want to overpay it.
Is it worth it?
Many people who have a mortgage ask themselves this question. The more so because we can now find a lot of conflicting information on the subject. Specialists dealing with this type of loans agree, however, that overpayment of the mortgage can prove profitable for us. By deciding on such a step, we can count on savings related to the interest rate on the loan. The bank should also refund the commission to us. However, this is not all.
Mortgage overpayments also mean reduced costs associated with servicing the loan and shorter loan period. For many people who experience discomfort associated with the responsibility for regular repayment of installments for several decades, this is of great importance.
In conclusion, everyone who has a mortgage should once again look closely at the terms of the contract he has signed and his own budget. If a gradual overpayment will not be a burden on your home finances, it is worth deciding to take such a step, if only to stop worrying about your debt.