When is it best to pay off a fixed mortgage in 2023?

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At the time of applying for a fixed mortgage, a repayment period is agreed upon with the bank, but it can be shortened with early repayment. In fact, it is a very good way to pay less interest. Below we will tell you when it is best to repay a fixed mortgage in 2023.


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Ways to amortize a fixed mortgage
There are two ways to repay the principal of a mortgage early:

Total amortization . It consists of paying the Colombia Email List amount of the debt at once and thus canceling the mortgage.
Partial amortization . Only a portion of the debt is deposited.
Partial amortization involves restructuring the mortgage payment. The normal course of installments and deadlines has been interrupted, so there are two possible readjustments:

Reduce fees while maintaining deadlines.
Reduce deadlines while maintaining quotas.
Either you pay less, or you just paid earlier. What is better?

It depends on your financial situation. If it allows you to think in perspective, it is more convenient to reduce the terms because, by paying for less time, less interest is calculated. On the other hand, if it is more important for you to relieve your monthly finances, you will prefer to reduce the payments even if you pay more interest in the long run.



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Best time to pay off a fixed mortgage
The majority of mortgages in Spain use the French amortization system . With this system, at the beginning the installments are mainly used to pay interest, and only a small part is used to amortize capital. This proportion is reversed as the loan is repaid until you end up paying much more principal than interest.   

What would happen if you repaid your loan early at the end of its life? That you would have already paid most of the interest. When is it best to amortize a fixed mortgage ? When there is more interest to pay, that is, at the beginning .

Interest is calculated from the capital pending amortization . Since, with the French system, only a small part is allocated to capital, this falls little at first, and the interests are high. By amortizing at the beginning you will reduce the capital sooner and, thus, the interest.



Commissions for early amortization of a fixed mortgage
As you have seen, the main reason for amortizing a fixed mortgage is to save on interest. The bank, however, knows this better than anyone, and that is why it sets a fee for early repayment. When comparing mortgages , this is one of the aspects that should not be overlooked.

You may have heard that, in 2023, this commission has disappeared. We are sorry to tell you that, in fact, this is the case, but only for variable mortgages . The reason? The measure is a defensive weapon against the rise in the Euribor, which only directly affects variable mortgages.

If you repay in the first ten years, the maximum the commission can reach is 2% of the total loan. If you do it later, at 1.5% . Knowing the amount that the commission would entail is one of the factors that help assess whether the mortgage should be repaid . To compare that figure with the interest savings that amortization would imply, we recommend using our mortgage plus expenses simulator .