If you decide to repay the loan ahead of schedule, 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.
Essence
Early repayment of a loan means that the loan is paid ahead of schedule. It is called full if the customer pays the entire amount at once. Partial early repayment of a mortgage implies an increase in monthly payments by 2-3 times (depending on the terms of the contract). In the second case, along with a decrease in debt, the payment schedule changes.
Schemes
The ability to pay off the debt prematurely depends on the lending 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 allocated to pay off interest. So the bank maximizes its profits and minimizes risks.
More beneficial 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 interest that accrues on the balance. As the debt is paid off, the amount will gradually decrease.
Debtor's benefit
The most attractive for the client is a differentiated scheme. The body and interest on the loan are paid in equal installments. It doesn’t matter how many years (3, 5 or 10) the debtor wants to close the loan. He just needs to pay the rest of the amount.
An annuity scheme has fewer benefits. The first few years, almost all funds are allocated to pay interest. By the time the client decides to close the debt, he will already pay such a commission that the family budget will not save immediately the balance of the amount.
If the debtor still decides to repay the mortgage ahead of schedule (for example, at Sberbank), the credit institution will recalculate it. Two options are possible:
- the customer will retain the original mortgage term, but monthly payments will decrease;
- the contract duration will be reduced , and the amount of payments will remain the same.
A mortgage repayment calculator can be found on the website of any lending institution. With its help, you can calculate the approximate amount of payment and compare two credit schemes. But you can carry out the calculation yourself.
Example
The client wants to get a mortgage of 1 million rubles. for a period of 20 years (240 months) at 12% per annum. First, determine the size of the monthly payment and interest.
According to a differentiated scheme:
1000: 240 = 4, 166 thousand rubles. - the body of the loan.
Interest is calculated by multiplying the balance by the annual rate and dividing the value by 12 months:
1000 x 0.12: 12 = 10 thousand rubles. - the amount of interest.
Thus, the amount of the standard monthly payment k will be:
4 166 + 10 000 = 14,166 thousand rubles.
According to the annuity scheme:
1000 x (0.01 + (0.01: (1 + 0.01) 240 -1)) = 11 011 thousand rubles. - the amount of the annuity payment, where:
- 0.01 = 1:12;
- 240 - the number of months of lending.
For comparison, we calculate the percentage component for the first payment:
1000 x 0.12: 12 = 10 thousand rubles.
That is, out of 11 011 thousand rubles. in the first month only 1 011 rubles. will be aimed at repaying the loan body, and the rest - on interest.
After 10 years, the client will pay the bank: 11 011 x 120 = 1321, 32 thousand rubles.
After the same period of time according to a differentiated scheme, the client will pay per month:
4.166 + (1000 - (4.166 x 120)) x 0.12: 12 = 9.167 thousand rubles.
Early repayment of a mortgage, in which a scheme with differentiated payments was used, is beneficial only in the first half of the contract. Over the years, the amount of payment decreases, most of the interest will be repaid.
Nuances
As practice shows, if a borrower expects early repayment of a mortgage, he should not only immediately choose a more profitable program, but also make a large amount per month.
There is no benefit only if the money that the borrower plans to use for a loan, at the moment, can bring more income when investing, for example, in deposits or other real estate. A deposit may become more profitable if the loan term is 25 years or more, as the monthly payment will decrease slowly.
Deposit Procedure
After the borrower decides to early repay the mortgage in Sberbank, he needs to decide on the method of depositing funds. It is better to pay monthly tranches in a larger amount than to periodically deposit two to three times the amount. But, firstly, the client cannot always deposit funds in such a volume. Secondly, the banks themselves provided for restrictions. For example, they accept early repayment only on the day the funds are debited, require a preliminary application for a change in the scheme. If the borrower later changes his mind, he will have to pay a fine. Therefore, the solution to this issue depends on whether the client wants to write a statement on a monthly basis, go to the bank for a new schedule, worry about unforeseen expenses , etc.
Mortgage repayment
The law provides for the use of capital for the acquisition or construction of real estate. Funds can be spent on down payment, principal or interest. For the borrower, the first scheme is the most disadvantageous. Firstly, not every bank accepts capital as an advance, and secondly, interest rates are increased for such programs. It used to be that if a client cannot make its first payment on its own, it means that it is insolvent or unreliable. Today, banks make concessions, but additionally insure their risks.
Most often, state funds pay the principal amount of the debt. It makes sense to transfer money to the interest account if the payer does not plan to repay the loan ahead of schedule. In this case, he will pay a commission at the expense of the capital, reducing the monthly tranche.
The bank must provide the following documents to repay the mortgage:
- passport;
- certificate for receiving capital;
- loan repayment application.
A bank employee will issue a certificate containing information on 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 parent capital. For this, it is necessary to collect and provide the following package of documents:
- passport of a person entitled to receive state funds;
- certificate;
- Documents confirming obligations to repay the loan: mortgage agreement and a bank statement;
- certificate of ownership of the apartment, contract of sale;
- a statement to the PF about the borrower's desire to transfer funds to pay the loan;
- other documents upon request.
A PF employee must issue a receipt on receipt of documents and indicate the date of receipt in it. Within a month, a decision will be made whether to pay funds to the bank or to refuse.
Insurance
A prerequisite for a mortgage program is insurance of debt or property, and sometimes both. After closing the loan ahead of schedule, the client has the right to demand compensation for part of the cost of services. The apartment insurance contract can be terminated ahead of schedule (if this does not contradict the terms of the loan) by paying a large penalty. Then the monthly payment will be reduced by the amount of insurance.
Refinancing
A client can apply to another bank to reissue a mortgage: change the method of payment, the duration of the program, rate and other conditions. A change in the lender does not mean removal of the burden. The apartment will still remain in the mortgage, but at another institution. Despite the obvious disadvantages (collecting a new package of documents, renewing the contract, additional fees), this method is appropriate if the client wants to change the loan repayment scheme to a more attractive one.