June 26, 2018 A mortgage is a liability that usually charges the budget for 20 years or more. Apart from the lack of savings, nothing prevents you to settle your debt earlier. However, you don’t have to pay it back in full, you can overpay your loan regularly with the help of smaller amounts. Learn the rules that apply to overpayment. Check if returning money earlier pays off and how else you can restructure your debt.
Loan overpayment – how is it different from previous repayment?
We talk about the overpayment of a loan when we refund more than the repayment schedule to the bank. For example, if you transfer twice the installment to your bank account once a year, i.e. you pay thirteen installments within twelve months. You can regularly overpay your credit by paying small amounts or transfer a larger amount once. The customer of each bank is entitled to overpayment, as well as the earlier repayment of the entire mortgage. This is guaranteed by the new mortgage law, amended in July 2017.
Earlier repayment of the cash loan is, in turn, regulated by the Consumer Credit Act. By taking out a loan of up to PLN 255,500, unless it is a loan to buy an apartment, you will not pay a zloty for an early refund.
Rules for overpayment of the mortgage
The rules for partial overpayment and total refund are the same. After the amendment to the Act, banks have a slightly limited possibility of imposing commissions. Loans with a variable interest rate only come with a compensation fee if you want to overpay the loan for the first three years of signing the contract. It is worth noting that we are talking about most mortgages. In Poland, almost everyone, about 99.5 percent, makes this type of commitment (data for Q1 2017).
The situation is different with loans with a fixed interest rate. At the moment, this is a margin on the market, which may change when the NBP raises interest rates. At this time, niche loans should be gaining popularity because they do not carry the risk of an increase in installments. However, when deciding on a mortgage with a fixed interest rate, you must know that banks will be able to charge a commission on early repayment at any time. It doesn’t matter when you decide to make an overpayment after three, five or fifteen years of signing the contract. However, they must inform you, before taking a loan, what the excess costs will be.
It is worth noting, however, that some banks do not charge any commission. That is why it is very important to follow the contract terms carefully.
Is it worth overpaying your mortgage?
By deciding on an overpayment, we can reduce the costs associated with servicing the loan. When we give away part of the money earlier, the bank is obliged to reduce the debt by interest for the time when we do not use the loan. He should also return a proportional commission value. The costs we incur should relate only to the actual period in which we use the loan. While most financial institutions return interest-related sums, some are reluctant to give borrowers money for one-off fees, such as commission, administrative costs, loan insurance fees, etc. In the unanimous opinion of the Financial Ombudsman and the President of UOKiK, this is illegal. However, before we make a complaint to the Financial Ombudsman, we should try to make a complaint.
If we overpay the loan, we will not only save money. We can also shorten the loan period. The customer usually decides for himself if he wants to reduce the monthly installment overpayment or stays at the current amount, but he gets rid of the debt faster.
We can withhold overpayment for the first 3 years of signing the contract. At this time, the additional money that we would like to spend on loan repayment is better to deposit in a deposit. In this way we will avoid bank fees.
Overpayment in the MdM program
Were you able to use the government support under the MdM program? If so, you must know that you have limited credit overpayment options. In order not to lose funding, the amount of overpayment cannot exceed the amount you received under the MdM program.
Importantly, the additional funding that is due if you give birth to a third child within five years of receiving support is not considered an overpayment. During this time, it is better to refrain from overpaying and start doing so after five years of signing the contract.
How else to reduce the loan installment?
By signing the annex to the loan agreement, you can negotiate new loan repayment terms. Restructuring during annexation does not have to focus only on overpayment. You can try to lower the installment amount by extending the loan period. However, in such a situation, usually the amount that you will eventually give back will be greater than before restructuring.
If you have several loan commitments, you can consider a consolidation loan. Transferring loans to one bank can give you a chance to obtain more favorable repayment terms, although a lot depends on your negotiating abilities.
Credit holidays will work as a cure for temporary financial problems. By using them, you can suspend debt repayment for a few months. Most banks, as well as some online loan companies, have this option. It is worth using the time off from credit obligations to build a financial cushion that will protect us from future troubles.