Paying off a mortgage early
I (happily) pay a part of my mortgage every year, my bank is ING and they have no questions about it.
The cost are quite moderate and very easy to calculate, however each bank might apply different charges so you better read what was written in your mortgage contract, and if a partial early repayment was contemplated.
Some banks discourage this option as it is not convenient for them.
ING policy is:
- Once a year
- Minimum 10% of total amount borrowed
- 3 months penalties charge based on monthly interest.
Even if 3 months penalties sounds a lot is actually quite considerate. Example:
You want to repay 10,000 EUR on a 100,000 EUR fixed mortgage at 4%
You first calculate the monthly interest = 4% / 12 months = 0.333%
Then apply the interest on the amount you want to repay
10,000 x 0.333 x 3 months / 100 = 99 EUR
Total cost for you should be 10,099 EUR.
After this you can decide if you want to reduce your monthly installments or shorten the period.
In the case of ING the calculations are done by their mortgage unit in Namur therefore it might happen that the branch where you ask information has absolutely no clue of the costs. Ask for an official document showing the costs.
Other banks have different policies, my friends with KBC can pay once a year at no cost but only at the anniversary of the mortgage.
For the tax you are right in your assumption, less mortgage means less tax rebates (but of course you pay less on a monthly basis).
Last thing: I never involved my Notaire!