Early repayment of mortgage: conditions, documents

If you decide to repay the loan ahead of time, you need to familiarize yourself with all the details of the contract. Banks are unprofitable early repayment of the mortgage. Therefore, they prescribe restrictive conditions in the documents.

The Essence

Early repayment of the loan means that the loan is paid ahead of schedule. It is called complete if the customer contributes the whole amount at once. Partially early repayment of the mortgage implies an increase in monthly payments by 2-3 times (depending on the terms of the contract). In the second case, along with the reduction of the debt, the schedule of payments changes.

Scheme

The ability to repay the debt prematurely depends on the credit system: there are annuity or differentiated payments. If the debt is paid all the time in equal amounts, then the first few years, almost all funds are sent to repay interest. So the bank maximizes its profits and minimizes risks.

More profitable for the client is a scheme with differentiated payments. The first payments will be very large, because they consist of the body of the loan and the interest that is accrued on the balance. As the debt is repaid, the amount will gradually decrease.

Benefit of the debtor

The most attractive for the client is a differentiated scheme. The body and interest on the loan are paid in equal installments. It is not important, after how many years (3, 5 or 10) the debtor will want to close the loan. He will simply need to deposit the balance.

The annuity scheme has fewer benefits. The first few years, almost all funds are sent to repay interest. By the time the client decides to close the debt, he will already pay such a commission, that the introduction of the balance of the amount at once the family budget will not save.

If the debtor still decides to early repay the mortgage (in Sberbank, for example), the credit institution will recalculate. Then there are two options:

• The client will retain the original term of the mortgage, but monthly payments will decrease;
• The duration of the contract will be shortened , and the amount of payments will remain the same.

The mortgage repayment calculator can be found on the website of any credit institution. With its help, you can calculate the approximate amount of payment and compare the two schemes of lending. But the calculation can be done independently.

Example

The client wants to issue a mortgage for 1 million rubles. For a period of 20 years (240 months) at 12% per annum. First determine the amount of monthly payment and interest.

According to the differentiated scheme:

1000: 240 = 4, 166 thousand rubles. - The body of credit.

The interest is calculated by multiplying the balance by the annual rate and dividing the value by 12 months:

1000 х 0.12: 12 = 10 thousand rubles. Is the amount of interest.

Thus, the amount of the standard monthly payment to will be:

4 166 + 10 000 = 14.166 thousand rubles.

According to the annuity scheme:

1000 х (0,01 + (0,01: (1 + 0,01) ²⁴⁰ -1)) = 11 011 thousand rubles. - the amount of annuity payment, where:

• 0.01 = 1:12;
• 240 - the number of months of lending.

For comparison, calculate the percentage of the first payment:

1000 х 0.12: 12 = 10 thousand rubles.

That is, from 11 011 thousand rubles. In the first month only 1 011 rubles. Will be directed to repay the body of the loan, and the rest - to interest.

In 10 years the client will pay the bank: 11 011 х 120 = 1321, 32 thousand rubles.

Through the same term on a differentiated scheme the client will pay in a month:

4,166 + (1000 - (4,166 х 120)) х 0,12: 12 = 9,167 thousand rubles.

Early repayment of the mortgage, in which the scheme with differentiated payments was used, is advantageous only in the first half of the contract. Over the years, the amount of payment is reduced, most of the interest will be already paid.

Nuances

As practice shows, if a borrower expects an early repayment of a mortgage, he should not only immediately choose a more profitable program, but also make a larger amount a month.

The benefit is absent only if the money that the borrower plans to use for the loan, at the moment can bring more income when investing, for example, in deposits or other real estate. The deposit can become more profitable if the loan period is 25 or more years, as the monthly payment will decrease slowly.

Procedure for depositing funds

After the borrower decides to early repay the mortgage in the Savings Bank, he needs to decide on the method of making funds. It is better to pay monthly tranches in a larger volume than to periodically pay a two to three-fold amount. But, firstly, the client can not always contribute in such amount. Secondly, the banks themselves envisaged restrictions. For example, they accept early repayment only on the day of writing off the funds, they must first apply for a change in the scheme. If the borrower then changes his mind, he will have to pay a fine. Therefore, the decision of this issue depends on whether the client wants to write a monthly statement, go to the bank for a new schedule, worry about unforeseen expenses, and so on.

Repayment of the mortgage by the parent capital

The law provides for the use of matkapital for the acquisition or construction of real estate. You can spend money to pay the down payment, principal amount or interest. For the borrower, the most disadvantageous is the first scheme. Firstly, not every bank accepts matapital as an advance, and secondly, interest rates are increased by such programs. It used to be that if a customer can not make the first payment himself, then he is insolvent or unreliable. Today, banks make concessions, but additionally they insure their risks.

Most often, state funds pay the principal amount of debt. To transfer money to the interest account makes sense, if the payer does not plan ahead of schedule to repay the loan. In this case, he will pay the commission at the expense of the funds of the matkapital, reducing the monthly tranche.

In the bank you need to provide such documents to pay off the mortgage:

• passport;
• Certificate for reception of a matkapitala;
• Application for repayment of the loan.

A bank employee will issue a certificate containing information about the remaining amount of debt and interest, a certificate of ownership.

The pension fund must give its approval for the repayment of the mortgage by the parent capital. For this it is necessary to collect and provide such a package of documents:

• Passport of the person entitled to receive state funds;
• certificate;
• Documents confirming the obligation to pay the loan: a mortgage agreement and a certificate from the bank;
• Certificate of ownership of the apartment, a contract of sale;
• A statement in the PF about the borrower's desire to transfer funds to the credit account;
• Other documents upon request.

A PF employee must issue a receipt on receipt of documents and indicate in it the date of admission. Within a month, a decision will be made to pay the bank funds or to refuse.

Insurance

An obligatory condition of the mortgage program is insurance of a debt or property, and sometimes both. After the loan is closed before the term, the client has the right to demand compensation for a part of the cost of services. The contract of apartment insurance can be terminated and ahead of schedule (if it does not contradict credit conditions), paying a large penalty. Then the monthly payment will be reduced by the amount of insurance.

Refinancing

The client can apply to another bank to re-arrange the mortgage: change the method of payment, the duration of the program, the rate and other conditions. The change in the creditor does not mean the removal of the encumbrance. The apartment will still remain in the mortgage, but already with another institution. Despite obvious shortcomings (collection of a new package of documents, re-registration of the contract, additional commissions), this method is appropriate if the client wishes to change the loan repayment scheme to a more attractive one.