After receiving a mortgage loan, buying an apartment and a housewarming noted, you will undoubtedly want to repay the mortgage loan ahead of time, and the question of whether it makes any sense to do so. The decision on the early repayment of the loan will be taken by you. However, this decision must be justified. What are the reasons for early repayment of a mortgage loan? A very weighty argument is the fact that early repayment of a mortgage loan exempts from the repayment of interest on the loan. Interest for 15-30 years of the usual term will be three times more than the loan itself (although this depends on the period of the interest rate and the loan). Accordingly, it can be concluded that early repayment of the loan means that you pay less for interest. It seems all right. However, in this case, you do not take into account the factor of inflation, which in Russia, despite the efforts of the state, is quite significant and makes about 10-15% per year. (And this is not statistics, but real inflation). So, in the long run, the profit of those who took a loan to build a house or buy an apartment is growing. It is not real incomes that grow (revenues versus prices), but the amount of wages as a result of inflation. Comparing your wages today with wages a few years ago, for example, 5 years or 10 years, you will notice that even if you stayed in the same workplace, your earnings increased by about 2-3 times over several years. Based on this, and the payment of the amount of the mortgage loan became for you in relation to your income is much less. Accordingly, if 5 years pass for example, the payment of the loan will become several times simpler than before. Even if you didn’t work five years ago, this amount will become much smaller in the future. The loan amount is gradually decreasing as a consequence of inflation, and to rush to pay it off, while the money that you owe is expensive, probably not such a good idea. After the expiration of for example ten years, you will probably pay more, but this money will already be devalued several times, and maybe even a couple of dozen times, it depends on inflation. There is a possibility that you will even repay the loan with one salary. It should be remembered that in the long run real estate prices are rising. At this time, when this article is written, the prices of real estate just begin to rise by a couple percent. However, taking the longest interval for example in 7-10 years. Rising prices even given the crisis will be quite noticeable. In this case, if possible, and desire, you should buy another property or shares. After all, it is elementary that good stocks or real estate objects grow in the long term, and money loses in value and at the same time is quite significant. If, after all, you made a decision on early repayment of the loan, you most likely will not have money for investments. No less important is the fact that after the early repayment of the mortgage loan, you lose the possibility of increasing your official salary by 13%, that is, the amount of income tax. This amount can be quite high, since there are no restrictions on preferential taxes on interest on a mortgage loan, as opposed to the amount on a home purchase. The amount makes a maximum of 2 million rubles. In case of early repayment of a mortgage loan, you will lose tax benefits for 200-300 thousand rubles. (depending on the amount of the mortgage loan). The conclusion is that the early repayment of a mortgage loan is not very profitable.
So is it still going to be decided on early repayment of a mortgage loan or not? In my opinion, the point is to do this in the following cases: - you have accumulations, and do not know how to use them. You don’t want to invest in mutual funds and stocks, you don’t want to buy property or start a business, because you don’t understand anything and don’t understand. Keeping money in the bank your income does not increase as interest in the bank is less than inflation. Early repayment of a mortgage loan, you still spend this money, and it is possible that on what may be nonsense. In this situation, there is a sense of free funds to send for early repayment of a mortgage loan. - if the mortgage loan puts a lot of pressure on you morally, monthly payments do not allow you to fall asleep quietly and you are afraid every day that you will be evicted and taken an apartment - early repayment of the loan will be the best way out for you. - Excess payments on the mortgage loan by 40 percent of your income, is not a small reason for sending your additional income to repay the loan.
- Reducing income from year to year, for example, due to the fact that your age is approaching retirement (and as a result you find it harder and harder to find a job that you would pay well), this may also cause early repayment of the loan.
- In a situation, if your income is very different in time, for example, in one month there is no income at all, and in the next there is a lot of it - paying mortgage payments will be quite problematic. That is why it will be reasonable if you send a part of the big money to pay off an early mortgage loan.
In which case you should not repay the mortgage loan ahead of time? Most likely, for people, people investing money in stocks, real estate or starting a business, premature repayment of the loan for them will be a strategic mistake in their long-term plan. As a result, we conclude that early repayment of the loan is a great benefit for the vast majority of people. Of course, doing it right away is not so easy. But after several years, the loan payments in relation to income decrease by 2-3 times, due to inflation, and given the constant minimum costs, the mortgage loan repayment becomes easier, as much as 4-5 times.
If you have decided to repay the mortgage loan ahead of schedule, you need to carefully read the contract. Most often, everything is quite simple, but nevertheless I want to describe a couple of questions that often arise.
- First, you should get acquainted with the minimum amount of early repayment and the minimum period. Since, one should not hope that the bank will count a couple of thousand which you will simply add to the loan.
- See where your early payment will be sent. There are two options. At first, your early payments will reduce the term of the loan. Otherwise, the size of loan payments will be the same as before, only the payment term will change. The second option is to reduce the amount of monthly payments by early repayment of payments. This means that the term of the loan will not change, for which you will pay less monthly. I, in turn, support the second option, since decreasing monthly payments will immediately have a positive effect on the family budget.
But it is always worth remembering that different banks make contracts in different ways. More often than not, you simply have no choice. That is why - look in advance. You will probably be set up for early, partial repayment of the loan, as a result of which you will have to decrease monthly loan payments, but it may turn out that the bank offers the only option that does not provide for a decrease in the loan term without decreasing monthly payments. In such a situation, it may not be worthwhile to pay off the mortgage loan prematurely. It is better to do the formation of reserves for the costs of loan payments and all kinds of insurance. The option of refinancing at a lower interest rate on a loan is suitable for you if you want to reduce monthly payments. This option is quite possible if you took out a mortgage loan at high rates, which then dropped significantly. In the case, the interest has decreased slightly or your loan is small - most often you should not be bothered, because refinancing will require a fairly large amount of time and money. - Special attention is required design. Most often, you will have to not only deposit the amount, but also write a statement. Because, putting a large amount on your own account, will not mean that they will write off more. Therefore, if you decide to pay off your mortgage prematurely, it might be a good idea. But there are situations in which it is better to do the formation of a reserve for payments or to carry out a loan refinancing. I hope that my explanations will help you choose the best option.