After you buy a house with a mortgage loan, you repay the principal of the loan in advance. Since prepayment is the repayment of principal, this means a loss of bank interest. For this reason, banks often stipulate a time limit or charge a certain amount of liquidated damages in the loan contract. During this period, the borrower is prohibited from repaying the loan early, which is called the lock-in period.

What are the precautions for early repayment of mortgage loans?

Generally, the loan period cannot be easily changed, but home buyers can choose to apply for early repayment of the loan. There are two main methods of partial early repayment: one is to shorten the repayment period and keep the monthly repayment amount unchanged; the other is to reduce the repayment amount and keep the repayment time unchanged.

Usually, shortening the repayment time can save more interest, but not all banks can apply to shorten the loan period and repay early, because some banks currently require that if you repay early, you can only reduce the monthly payment. The repayment amount and loan term remain unchanged.

From the perspective of home buyers, shortening the loan period is not suitable for everyone. For those who choose to repay the principal and interest in equal amounts, when the repayment period exceeds half of the loan period, it means nearly 80% interest. It has been paid off within this period, and the remaining monthly payment is basically the principal, so there is little point in shortening the period and repaying it in advance.

Generally speaking, early repayment can be done once or twice a year. The regulations of each bank are different, and early repayment needs to be applied for in advance. Take home loans as an example. Starting from the first day of the loan, most banks stipulate that early repayment can be made after one year and no penalty will be charged. Each bank's regulations on whether to charge penalty or not are also different.

Generally speaking, there is a limit to the number of early repayments in a year. There is no relevant regulation on the number of early repayment opportunities during the loan period. Is there an optimal time to repay a loan early? In fact, it all depends on the home buyer's own situation. For example, when applying for a mortgage, the interest rate was higher, but now the interest rate is lower. Repaying the loan early will not affect your life and reduce the monthly payment. There is nothing wrong with repayment based on burden.

But now the interest rates are rising, and the penalty for early repayment has also increased. If you can get along just fine without having to repay in advance, then you are doing something wrong if you insist on paying more interest and penalty to the bank. In the final analysis, it is not so much choosing the best time to repay your loan early, but choosing the right repayment situation that suits you. What is best for you.