The legislation of the Russian Federation provides for the right of the borrower to repay the mortgage early. It is prohibited for banks to deny such a wish to customers. However, many financial institutions are trying to delay the process within the framework of the Law, wishing to receive longer income in the form of interest. How to act in such a situation, the client and how to exercise their right to early repayment of the loan with minimal costs?
How to repay a housing loan before the deadline
It is possible to repay the mortgage loan in full or in part ahead of schedule. In the latter case, the terms of the contract with the client are revised, the monthly interest rate on the loan or the period of its return is reduced.
Instructions for the borrower
- warn the Bank's employees about the desire to fully or partially repay the housing loan ahead of time. Contact the branch of the Bank where you signed the contract. Visit the financial institution in person or send the application by registered mail. Do this no later than 1 month before the expected repayment of the loan;
- find out the amount of debt with interest. It is important to repay the loan to a penny, otherwise it will not close, interest will continue to accrue;
- Deposit money to the Bank or make a wire transfer, do not forget to make a Commission for the service;
- contact the financial institution and ask if the money has reached you and if the mortgage loan has been fully repaid.
Pros and cons of early repayment
Early repayment of a housing loan is not always equally beneficial for the Bank's client. Financial organizations often go to "tricks" in an attempt to get more profit from lending.
In the case of annuity payments (the monthly amount is unchanged, the main part of the payment is interest), it is advantageous for the client to return the money to the Bank as soon as possible, because the main part of the contributions goes to repay the interest, not the principal. After 5-7 years, the benefit of early return of the balance is significantly reduced.
In the case of differentiated payments, the principal is extinguished in equal installments, interest is accrued on the balance. Overpayment is directed to the repayment of the principal, interest and monthly payments are automatically reduced.
When paying off the mortgage before the deadline there is a drawback – there are difficulties with the return of 13% of the tax provided by the Law. It is important to calculate in advance that it is more profitable for the borrower – to quickly pay off the debt and save on interest or return the money through a tax deduction.