What is an early loan repayment?
The early repayment is the payment by the borrower of part of the capital borrowed or the totality of the capital remaining due. The early repayment is calculated taking into account the total amount borrowed from which the capital already repaid by installments is subtracted.
Repayment can be achieved by terminating the term of the loan agreement.
As a result, the borrower can repay all or part of the outstanding capital to the credit institution.
Early repayment allowance
During an early repayment of an immo credit, the bank may apply fees as stipulated in the loan agreement, in accordance with Articles L312-21 and R312-2 of the Consumer Code. The IRA (Early Redemption Indemnity) or the PRA (Early Redemption Penalty) are capped at 3% of the outstanding capital, without these indemnities or penalties being greater than 6 months of interest at the rate fixed at the time of the subscription of the loan immovable.
It is possible to negotiate fees with the bank provided you do so before signing the refund.
However, it is important to know that early repayment is not always possible if the outstanding capital is less than 10% of the total amount of the loan. This clarification is mentioned in the clauses of the loan agreement.
How to calculate?
To know the maximum amount of prepayment allowances, it is possible to use an online simulator or to perform the calculation taking into account the amount of capital borrowed and the rate of credit.
For example, in the case of an immovable loan of € 150,000 at a rate of 5%, of which the outstanding capital is € 100,000, the allowances or penalties are calculated as follows:
Or 3% of the outstanding capital: (100,000 x 3) / 100 which corresponds to 3,000 €;
That is 6 months of interest at 5%: (100,000 x 5) / 100 x 6/12 = 2,500 €.
In the latter case, the IRA is the most favorable for the borrower.
Real Estate Mortgage Refund Simulation Tool
A simulation tool is able to calculate, from the data provided, the amount of partial prepayment of an immo credit. To do this, the borrower must provide information on the Internet page:
- The remaining capital
- The credit rate
- The remaining term to be repaid
- Repayment payments excluding insurance
- The amount he wants to repay in advance.
Once all these elements are transmitted, the simulator of early repayment of a mortgage presents a new depreciation schedule. Read also Decrypt a depreciation schedule It specifies the new monthly payments, the duration of the loan, the capital remaining due, the amount of interest.
The result of this simulation is to know the new cost of credit as well as the gain realized by the borrower.