Commissions for Early Repayment: The Guide to the New Mortgage Law

You have saved some money and want to pay off your mortgage. It is a smart move. But then you read the small print of your contract and see that dreaded word: "Desistance Commission" or "Compensation for Early Repayment".

The Problem: The "Tax" on Savings

Historically, banks in Spain charged abusive penalties if you wanted to pay your debt ahead of time. Basically, they charged you for stopping paying them interest. Many owners hesitate to amortize because they think the commission will "eat up" the benefits of saving.

The Agitation: Is What They Charge You Legal?

Here is where you need to be a Realist. The bank is a business, and losing your debt is bad for their business. However, since the Real Estate Credit Law of 2019, the game has changed. Many old contracts contain clauses that are now null or limited by law. If you pay what the bank asks without checking, you could be giving away money. For mortgages signed after June 2019:

Variable: Maximum 0.25% (years 1-3) or 0.15% (years 1-5). 0% after.

Fixed: Maximum 2% (first 10 years) and 1.5% (rest).

If your mortgage is variable and is more than 5 years old, your commission should be €0.

The Solution: Calculate the Real Cost

Even if you have to pay a commission (e.g., 2% on a fixed mortgage), it rarely exceeds the interest savings. Let's run the numbers. Paying a €200 fine to save €15,000 in interest is the most profitable investment you will make in your life. Do not let a small commission paralyze you.

The Simulation on Amorti

Let's check if it pays off to pay the fine. 1. Enter your mortgage in AmortiApp. 2. Go to "Extra Payments" and enter the amount you want to amortize (e.g., €10,000). 3. Look at the "Interest Saved" field. Let's say it's €12,000. 4. Calculate your commission manually (or look for the commission field in the app if available): 2% of €10,000 = €200. The Analysis:

Cost: €200

Benefit: €12,000

Net Result: +€11,800

The fear of the commission is irrational compared to the magnitude of the savings. Verify your numbers and break the chains.

Key Takeaways

Check your mortgage contract to see if the commission clause is still valid.

Calculate the real cost of paying off your mortgage early.

Use tools like AmortiApp to simulate the savings.

Don't let the fear of commissions stop you from making a profitable decision.

How to Avoid Commissions

To avoid commissions, you can:

Check if your mortgage contract allows for early repayment without penalties.

Negotiate with your bank to waive or reduce the commission.

Consider switching to a mortgage with a lower or no early repayment commission.

Make extra payments to reduce the principal amount and save on interest.

The Impact of the New Mortgage Law

The new mortgage law has brought significant changes to the way banks operate in Spain. The law aims to protect consumers and promote transparency in the mortgage market. With the new law, banks are required to:

Clearly disclose all fees and charges associated with the mortgage.

Provide borrowers with a detailed breakdown of the costs involved.

Allow borrowers to repay their mortgage early without excessive penalties.

Benefits of Early Repayment

Paying off your mortgage early can have numerous benefits, including:

Saving on interest payments.

Reducing the principal amount owed.

Improving your credit score.

Gaining financial freedom and peace of mind.

Conclusion

Commissions for early repayment can be a significant obstacle for those looking to pay off their mortgage ahead of time. However, with the new mortgage law in place, borrowers have more protection and options than ever before. By understanding the law, calculating the real cost, and exploring alternatives, you can make an informed decision and save thousands of euros in interest payments. Take control of your finances and start saving today.

Frequently Asked Questions

What is the maximum commission for early repayment in Spain?

+ For variable mortgages, the maximum commission is 0.25% (years 1-3) or 0.15% (years 1-5), and 0% after 5 years. + For fixed mortgages, the maximum commission is 2% (first 10 years) and 1.5% (rest).

How can I avoid paying commissions for early repayment?

+ Check your mortgage contract to see if the commission clause is still valid. + Negotiate with your bank to waive or reduce the commission. + Consider switching to a mortgage with a lower or no early repayment commission.

What are the benefits of paying off my mortgage early?

+ Saving on interest payments. + Reducing the principal amount owed. + Improving your credit score. + Gaining financial freedom and peace of mind.