A mortgage, the financing of your home, is a financial obligation that you enter into for a period of 30 years. With a personal loan, for financing loan goals such as a car, kitchen, renovation or second home, you also enter into a financial obligation but with a shorter duration, up to 10 years. Good to know clearly in advance which conditions apply to your mortgage or loan. What are the options and associated costs if I want to pay off in the meantime?
Non-penalty repayment of mortgage
In the case of extra (early) repayments, the costs to pay are a big difference. With a personal loan, and also with a revolving credit, you can always repay the loan free of charge. With a mortgage that costs money: you have to pay a penalty interest to the bank for missing out on the calculated interest. You actually harm the bank if you pay off early. As compensation they charge a penalty interest. This is only the case if the interest at that time is lower than the interest that you should have paid to the bank. If the interest rate is higher, the bank has no disadvantage but an advantage.
How high is the penalty interest?
The amount of the penalty interest is not easy to determine; it depends on many factors. What type of mortgage does the customer have, what is the outstanding mortgage amount, what is the penalty-free amount in the terms and conditions, what is the monthly repayment of the mortgage? The answers to these questions determine the amount of the fine.
Banks previously used different methods of calculation, which made it non-transparent for consumers. That is why the AFM regulator drew up guidelines in 2017 stating that the calculation of the penalty interest must be verifiable in accordance with the guidelines they have drawn up.
However, the bank is not required to submit a specification of the calculation to the customer. This is apparent from a recent decision by the Kifid (Financial Services Complaints Institute) concerning a case in which a consumer did not agree with the penalty interest charged to him and wanted a specification of the amount. The Kifid agreed with the bank; it had adhered to the established guideline and is therefore not obliged to give a specification to the customer.
Repaying a loan without penalty
Nowadays you no longer pay penalty interest with extra interim repayments on or with early repayment of the personal loan.
A fine clause may still apply to old loans based on the conditions if you repay or repay the loan early.
With a personal loan you pay the same amount in interest and repayment every month during the term. Is early repayment then smart? The moment the loan is partially or fully repaid, it is discounted. That is, the outstanding balance is determined based on the present value of the loan. The interest that is still in the remaining monthly installments (of the term) is deducted from the gross balance. In this way the net balance remains as the payment balance at that time. You therefore pay the actual interest and not the interest that is calculated in advance over the entire term.
A lender is required by law to show the total gross balance (= the number of months multiplied by the installment amount) in the contract so that the consumer has an idea of what he is paying in total during the entire term.
Do you have a current loan for which you pay a high interest rate? You can transfer it to us free of charge so that you will pay a low interest rate. Use our online transfer service and we will arrange the transfer for you.
In the case of early repayment on your mortgage and what the costs are, your mortgage adviser can tell you more. If you repay your mortgage in full, you must pay not only the penalty interest but also costs to the notary for canceling / canceling the mortgage deed in the land register.
If you want to transfer your mortgage to another type of mortgage, they can make a calculation of the costs compared to the savings that you hope to make.