When can you repay your loan?
You can repay your loan early, fully or partially, at any time over the duration of the contract. However, you are required to file an early repayment application either in writing or in person to the Bank’s branch at least 10 working days before the date of intended early payment.
Which charges might you have to pay?
A) Pursuant to the Consumer Credit Act, in case of early repayment of loans agreed upon or refixed after 1 December 2016, we have the right to require compensation of reasonable costs incurred in relation to the early repayment.
When signing the loan contract with you, we assume that repayment of the mortgage loan will be spread over the entire duration of the contract or at least over the interest rate fixation period, reflected in the credit terms offered by us, including the interest rate.
If you wish to repay your mortgage loan early and terminate the loan contract, we will incur additional costs not envisaged upon signing the contract:
- Administrative costs
We need to prepare and process the early repayment documents, which is not part of normal loan management activities. The administrative costs of such processes are presently estimated at CZK 1,500.
- Financial costs
Your mortgage loan bears a fixed interest rate which remains constant over your fixation period. Every mortgage loan is financed from funds earned on the financial market for a period similar to your fixation period. The costs incurred in earning the funds are covered from interest charged on your mortgage loan.
If you pay off your mortgage loan early, you stop paying interest. However, we are liable to further pay the cost of the funds raised to finance your mortgage loan, until the end of your taxation period. On the other hand, the money received from your early repayment can be further lent out as a new mortgage loan at the mortgage loan interest rate existing at the time of your early repayment.
Interest rates vary over time. It may happen that your contractual interest rate is higher than the current mortgage loan interest rate, and thus we will be unable to lend out the early repaid principal of your mortgage loan under similar or better terms.
In such case, early repayment of your mortgage loan results in financial costs incurred by us which can be simply described as follows:
Financial costs = amount of your early repayment × (difference between your interest rate and the current mortgage loan interest rate for the remaining part of the fixation period) × time remaining until the end of your fixation.
Of course, we do not require payment of interest on the mortgage loan as if it had not been repaid early; we only ask that the financial costs incurred by us in consequence of the early repayment (i.e., the costs which, irrespective of your early repayment, we will have to pay for the money raised by us to grant you the mortgage loan) be covered.
If your interest rate is lower than the current mortgage loan interest rates, no additional financial costs are incurred and, in such case, we will not charge any costs.
The current interest rate for compensation of financial costs will be determined as the amount of the standard fixed interest rate charged on mortgage loans with a fixation period equal to the period from your early repayment to the end of your fixation.
If we do not offer a fixed interest rate for exactly that period, we will use the interest rate applicable to the closest shorter time for which a fixed interest rate is offered (e.g., if the period is 3.5 years, we will use the interest rate offered for 3-year periods). If the period is shorter than 1 year, we will use the 1-year interest rate.
B) If loans agreed upon before 1 December 2016 and not refixed after that date are paid off early, we are entitled to receive a compensation fee under the existing scale of fees or to compensation of costs agreed in the loan contract.
Your banker will inform you of the exact amount to be charged under the above-described circumstances.
How to reduce the amount charged as compensation for financial costs?
The amount charged as compensation for incurred financial costs depends on:
- The amount that you wish to pay off early,
- The time remaining until the end of your fixation period,
- The difference between the Bank’s current interest rate charged on mortgage loans and your interest rate.
The best way to fully avoid compensation for financial costs is to observe the initially agreed fixation period. If you pay off your loan early at the end of its current fixation period, the early repayment will be free of charge.
A) We do not charge any amount as compensation for incurred costs if the early repayment is made:
- from benefits paid under the insurance policy covering repayment of the loan,
- in a period for which no fixed interest rate has been agreed (i.e., a variable rate is applied rather that a fixed rate)
- within 3 months of announcement by the Bank of a new interest rate (i.e., upon refixation and during 3 months before the refixation date)
- in consequence of the death, long-term illness or disability of the client, the client’s spouse, or the client’s registered partner, provided that such event results in substantial impairment of the ability to repay the mortgage loan,
- within 1 month before the anniversary of signing the mortgage loan contract, and maximum 25% of the funds drawn on the loan.
If, as at the early repayment date, the mortgage loan contract has existed longer than 24 months and the loan is paid off early in relation to the sale of the property pledged to secure the loan or the property financed by the loan, the amount of early repayment charges must not exceed 1% of the early repayment, however, the maximum amount that may be charged is CZK 50,000.
B) We do not charge any compensation fee for early repayment if the early repayment is made:
- in a period for which no fixed interest rate has been agreed (i.e., the rate has not been fixed)
- within 1 month before the end of the current fixation period.