Early repayment: when do we pay penalties?


After taking out a mortgage, it is quite possible to make an early repayment. However, the borrower must not forget that, in most cases, he is liable for penalties . Indeed, loan agreements generally specify terms and conditions for prepayment indemnities (ARIs) . Everyone can know how much they raise before making their decision.

What is the amount of the reimbursement benefits?

 What is the amount of the reimbursement benefits?

The calculation of the early repayment indemnities is set by Articles L313-47 and R315-25 of the French Consumer Code. They must not exceed 6 months of interest on the outstanding capital, at the average loan rate. In addition, they never exceed 3% of the amount to be repaid.

A jurisprudence of the Court of Cassation dating from 2013 also comes to frame more the practice: the IRA is expressly specified on the loan contract . Thus, a simple indication of the method of calculation under the conditions is not considered sufficient.

In which cases is the exemption possible?


Some individuals can repay their loan early without having to plan an IRA. This is very often the case for variable rate loans , especially when rates are reviewed with significant variations.

Zero-rate loans and employer loans also involve an exemption from these additional fees for a refund before the expiry of the contract.

Finally, there is a law applicable to all loans made after July 1, 1999 if the property is sold for a change of employment, death (the borrower or spouse) or a forced termination of the professional activity, IRAs are not payable.

On the other hand, the owner must provide in addition to his penalties, a charge of release if the guarantee taken by the bank for the granting of the loan is the mortgage of the financed property

Why and how to negotiate IRA?


At the time of signing the contract, you should take the time to project yourself: if you think you have the opportunity, one day, to repay your credit in full, we must evaluate the possibility of reducing – or canceling – the indemnities of prepayment.

In concrete terms, if you have planned to live a few years in the new home, you can negotiate a withdrawal of IRAs beyond a certain time , after paying your credit for 10 years, for example. In addition, you can choose to reduce their amount by discussing around their rate.

Generally speaking, it is considered easier to revise IRAs when working with the same bank for a long time and remain faithful: the broker will be able to discuss with your institution to put in place conditions favorable. It will also be able to solicit other organizations to generate a contract to repay early while limiting ancillary costs.

To acquire real estate and earn credit, the rate is not the only useful indicator. Indeed, prepayment allowances are a very important criterion , on which it is highly relevant to consider negotiations. Even if you do not think you will ever be able to repay the full amount due, remember that specific (and unpredictable) situations can change the game, especially in the case of inheritance.