Early repayment of mortgages will be more complicated starting from September

Banks will be able to charge tens of thousands of crowns for early repayment of mortgages during the fixing period instead of the current hundreds of crowns. This will be made possible by an amendment to the Consumer Credit Act, which was approved by MPs in November on a proposal from the Ministry of Finance.

This change will come into effect from September 2024 and will only apply to new contracts – if you have taken out a mortgage before September 2024 and have not yet refinanced it, refinancing will be free.

How will the fee be calculated?

The “fee” for early repayment will be lower than the Ministry of Finance originally proposed. Instead of two per cent, it is capped at one per cent of the remaining principal (the amount left to pay off).

The approved amendment calculates the fee as follows: 0.25% of the remaining principal for each year remaining in the fixation period, up to a maximum of 1%!

To give an example:

We have an agreed mortgage and we want to repay/refinance it to another bank. We still have 3 years to go before the end of the fixation period. What will be the maximum early repayment fee?

For each year remaining, 0.25%, i.e. a total of 3*0.25% = 0.75%.
The remaining amount to be paid is 3 million (only the outstanding principal is counted, so the remaining interest is not counted).
In this case, the maximum fee is 0.75% of 3 million = 22,500 CZK.

However, in the same case, if we had, say, 8 years left in the fixation, the fee would NOT be 8*0.25 = 2%, since the maximum is 1%. Thus, a percentage of three million = 30.000 CZK would be paid.

This change will definitely bring less customer mobility between banks and it will be much more essential to set the fixing period correctly! 

If you want to meet for an initial meeting, you can email me at info@czechadvisors.cz or call me on +420 723 599 563.

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This article has been written by Maxmilián Rožek.

Maxmilián Rožek

Mortgage Advisor, Co-founder of CzechAdvisors
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