Retirement Credit: The fast repayment is worth it. The faster repayment of real estate loans pays off. With the same installment, special repayment financing will be completed more quickly. Would you like to pay off faster because of the low interest rates? These allow a faster repayment of loans. Read http://marthamihalick.com for a critique
To what extent should the real estate loan be repaid quickly?
The repayment determines how quickly a consumer pays the loan back to the house bank, ie when the consumer is completely free from debt. An optimal repayment rate does not exist – the repayment rate that is appropriate depends on the fixed interest rate, the loan interest accrued and the economic situation of the borrower. However, in order to keep the total cost of credit as low as possible, consumers should seek to repay the real estate loan as soon as possible.
When a real estate loan is granted, a certain repayment portion is deposited directly in the loan agreement. It indicates the percentage of the loan that the borrower pays in constant installments to the house bank. The lower the repayment amount, the lower the repayment installment, the more time the borrower will need to repay the loan in full to the principal bank. Because the customer still has to pay the corresponding monthly loan interest together with the repayment installment, the total borrowing costs increase due to the lending rates with a low repayment portion.
With a very low interest rate on real estate loans,
It is highly recommended to choose a higher initial repayment: The residual debt, which the consumer still has to pay off after the end of the commitment period, is significantly lower if the repayment rate is higher. In particular, if the lending business and the fixed interest period are closed in a low interest rate, it is unlikely that the subsequent financing will have to be repaid at a higher cost.
Moreover, when borrowing a mortgage loan, borrowers should ensure that the principal carries out unscheduled repayments during the repayment phase. If changes in the financial framework occur during the longer term, this unscheduled repayment may reduce the term of the loan. This means that the debtor can pay less interest and thus lower the total credit costs.
If a repayment takes place in addition to the contractual special repayment, higher fees are usually payable. By shortening the loan term by the unscheduled repayment, the house bank receives less interest than it has actually calculated. This interest loss must be offset by the debtor through the so-called early repayment penalty. The amount of the early redemption penalty depends on the outstanding loan amount, the remaining term of the loan and the amount of the unscheduled repayment. In this case, the sum of the premature repayments is paid to the lender.
Since the interest loss on the mortgage loan amount is usually very high, it is often cheaper for the borrower to invest any excess amount in a savings account. In addition, many credit institutions do not allow unscheduled write-offs on real estate loans.