Paying back a Real estate loan early any fines?

[Hamletintaiwan]

@Marco

I think he means it’s 5x the value of the entire loan, not what’s currently owed.

Exactly!

[QuaSaShao]

I paid off two apartment loans early with Fubon and Union Bank and there were no penalties.

[SuperS54]

@Marco

Can you provide examples?

I suggest doing a bit of googling taking into account your own situation, it very much depends on your personal circumstance and the country you/your property is in.

In a lot of cases a mortgage is the cheapest borrowed money you will ever get so by paying it off you lose out on the opportunity cost of using that money for something else ~ be it your rainy day fund or an alternate investment. It’s generally a PITA to re-mortgage a property to get that cheap money again.

Obviously tax relief on mortgage payments can be a big factor for some countries/people but there are also certain government/social entitlements that those who fully own their own property can be excluded from, again everyone’s circumstance will be different.

Some banks charge a penalty for early retirement and in some countries it can even negatively impact your credit score!

[meishijia]

Very true.

If paying off the mortgage early only saves you 1.5% a year in interest then you are way better using that money to invest in some fund with average returns of 7% a year like S&P500 and continue making the minimum mortgage repayments. That difference of 5.5% per year is like free money.

If you suddenly find yourself with a lump sum of money you should only pay off your bad debts (4.5% interest or more) and just invest the rest whilst paying minimum payments on the good debt, e.g mortgage, student loan. UK student loan has just a 1.5% interest rate if you earn below 27,000 GBP per year.

[Marco]

@SuperS54

I suggest doing a bit of googling taking into account your own situation, it very much depends on your personal circumstance and the country you/your property is in.

I understand, I just wanted to have a basis on where to start.

@SuperS54

In a lot of cases a mortgage is the cheapest borrowed money you will ever get so by paying it off you lose out on the opportunity cost of using that money for something else ~ be it your rainy day fund or an alternate investment. It’s generally a PITA to re-mortgage a property to get that cheap money again.

Obviously tax relief on mortgage payments can be a big factor for some countries/people but there are also certain government/social entitlements that those who fully own their own property can be excluded from, again everyone’s circumstance will be different.

Some banks charge a penalty for early retirement and in some countries it can even negatively impact your credit score!

I appreciate your reply.

[Mick]

Also, worth noting banks are flexible in how you deal with a mortgage, for example you can get one that doesn’t require you to pay back capitol for 2 or 3 years, they will normally lock you in for at least a 2 or 3 year period that if you move the mortgage to another bank you will pay a penalty.

That works here as it does in the UK, I know someone who bought a couple of properties to rent out and moved the loan every few years and has been doing that for 30 years. The rent more than covers the interest on the mortgage and if at any time he wanted to cash out he sells the property and pockets the difference in how much the property has gone up over the past 30 years.