Buyouts, renegotiation, bridging loans
Repaying your mortgage early: paying the compensation fairly
Repaying early is a right. The compensation is due only if the contract provides it, capped at the lower of two calculations. The exempt cases.
Repaying a mortgage before its term is a right that the contract can never remove for the full balance. The compensation is only due if the contract provides for it, and it is capped at the lower of two calculations: months of interest on the capital repaid, or a share of the outstanding capital. The law exempts three cases, all of which require that the repayment be motivated by the sale of the property.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- Repaying a mortgage early, in part or in full, is a right that the contract can never prohibit for the full balance.
- The compensation is only due if the contract provides for it, and its amount follows the lower result of two distinct cap calculations.
- The two caps apply to different bases: months of interest on the capital repaid, and the other on the outstanding capital before the operation.
- The three cases of full exemption from compensation all require that the repayment be motivated by the actual sale of the property.
- Upon simple request, the lender must provide free of charge a breakdown quantifying the consequences of the early repayment.
You may always repay your mortgage before its term expires. The lender will only claim a fee if the contract provides for one, capped at the lower of two calculations: recalculate them to pay the least. See also buying, the bridging loan and early repayment, or, for a rate arbitrage, the profitability of a renegotiation.
Do I have the right to repay my mortgage early?
Yes, in part or in full. The contract may only prohibit small partial repayments, never the outstanding balance.
C'est une faculté ouverte au contrat, pas une règle automatique : beaucoup de contrats ne l'utilisent pas. À vérifier dans vos conditions générales, rubrique remboursement anticipé. Elle ne s'applique jamais au solde du prêt.
- En vigueur depuis le
- Source
- Article L. 313-47 du code de la consommation — Légifrance
The cap on the fee: the maximum the lender may claim
If the contract provides for it, the fee is capped by two calculations, and the lower one applies.
Le plus bas des deux plafonds
Le texte enchaîne les deux bornes par « sans pouvoir dépasser » : l'indemnité ne peut excéder ni l'une ni l'autre. Le montant exigible est donc celui des deux calculs qui donne le résultat le plus faible.
- En vigueur depuis le
- Source
- Article R. 313-25 du code de la consommation — Légifrance
Two different bases: do not allow yourself to be overcharged
The interest months apply to the capital repaid, while the percentage applies to the outstanding capital before the operation.
In the case of a partial repayment or a low-interest loan, the interest-months cap often prevails. Perform both calculations. Is the loan stepped or level? An increase is possible: request the details in writing.
The cases where you pay no compensation
Three cases: change of place of work, death, or forced cessation of activity, of yourself or your spouse. All assume the sale of the property.
- vente du bien immobilier faisant suite à un changement du lieu d’activité professionnelle de l’emprunteur ou de son conjoint
- décès de l’emprunteur ou de son conjoint
- cessation forcée de l’activité professionnelle de l’emprunteur ou de son conjoint
Liste limitative : ce qui n'y figure pas n'exonère de rien. L'exonération ne vaut que pour les contrats conclus à compter de l'entrée en vigueur de la loi n° 99-532 du 25 juin 1999.
- En vigueur depuis le
- Source
- Article L. 313-48 du code de la consommation — Légifrance
La phrase de l'article place la vente du bien avant l'énumération des trois motifs : c'est le remboursement « motivé par la vente du bien immobilier faisant suite à » un changement de lieu d'activité, un décès ou une cessation forcée d'activité qui est exonéré.
- En vigueur depuis le
- Source
- Article L. 313-48 du code de la consommation — Légifrance
If you are transferred without selling, or in the case of a loan buy-back: there is no exemption. Your contract may be more generous: read the clause.
I am selling my flat to buy another: what will the loan exit cost me?
Without a transfer, death, or forced cessation, the compensation provided for in the contract is due, up to the lower of the two caps.
- The compensation, on the outstanding capital of the last amortisation schedule.
- The security: a mortgage is released at your expense (the release), a surety returns a share (what is refunded). Surety or mortgage.
- The financing of the next property.
A transferability clause, rare, avoids settlement: transfer your loan. Buying before selling? The bridge loan.
Request the free settlement statement before making a decision
Upon simple request, the lender calculates free of charge and promptly the repayment: outstanding capital, compensation with its two calculations, effective date. Without the two calculations, refuse it.
Repay in advance or keep the funds invested?
Compare the interest avoided, compensation deducted, with the net yield of the funds invested.
- Late in the loan, you avoid almost no interest.
- Keep a precautionary savings for your next application.
- Shortening the term avoids more interest than reducing the instalment.
The amortisation schedule gives the interest avoided.
What if the loan to be settled is not a mortgage?
Consumer credits and revolving credits fall under Article L. 312-34 of the Consumer Code, with their own caps; in a consolidation, each line follows its own regime.
The consumer credit does not fall under the mandate under which I act: I can explain the mechanics to you, I do not intermediate it and I do not propose it. The credit consolidation does not fall under it either today: the credit consolidation, for information, and who to go to. The buyout of a mortgage remains a mortgage.
Divorce? The buyout of the equalisation payment.
Your clause in hand? Create your application or have the two calculations redone by telephone.
Regroupement de crédits
Un regroupement de crédits dont la part des crédits immobiliers ne dépasse pas 60 % du montant total de l’opération relève du crédit à la consommation (C. consom., art. L. 314-10, L. 314-11 et R. 314-18). Le code impose alors la mention suivante sur sa publicité :
Un crédit vous engage et doit être remboursé. Vérifiez vos capacités de remboursement avant de vous engager
Sources
Read next
- Mortgage rates in Lyon: current rates by loan term
- Renegotiating your mortgage or having it refinanced: the calculation that tells you whether it is worthwhile Renegotiating or refinancing your mortgage is only worthwhile if the interest saved exceeds all costs. The method in six lines, and when to abstain.
- Bridge loan: how it works, its 3 forms and what to do if the property does not sell Buying before selling: dry bridge, secured bridge or buy-to-sell, what the bank actually advances, and the outcomes if your property takes time to sell.
- Transferring your mortgage to another property and keeping your rate Keeping your rate when moving: where to find the transferability clause in your loan offer, its conditions, and the solutions when it is missing.
- Buyout of the equalisation payment and release from joint liability: keeping the property and taking over the loan alone Equalisation payment, transfer duty, bank consent, deadlines: what you need to arrange to keep the property and take over the loan alone after a separation.
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