The amendment to the Mortgage Act and its effects in practice
The amendment to the Mortgage Act with effect from 1 January 2012
Thanks to this amendment, the client can repay a property-secured loan free of charge for early repayment on the anniversary of the interest rate fixation. This option was standard for clients of several banks even before the amendment – but it was not the rule, and some clients suffered the consequences of this by paying huge penalties for early repayment.
September 2012 brought several changes
Thanks to the amendment to the Mortgage Act, the first positive change since September 2012 was the expansion of the possibility for full repayment on the anniversary of the fixation and the partial repayment of the mortgage at any amount.
Thus, on the anniversary of the fixation, the client can not only pay off the entire loan, but also any part of it, which will be directly proportional to the reduction of the amount owed to the bank and the interest they would otherwise have paid. This step represents the unification of the banks.
The banks differ in the possibility of a reduction in payment or shortening the maturity period after an extra payment. In some banks, it is possible to keep the maturity period and reduce the monthly payment, and in others, it is possible to choose even a shorter maturity period and to keep a comparable amount of the monthly payment.
The second September change to the amendment to the Mortgage Act is that banks are obliged to notify the client at the latest two months before the end of the fixation of the new interest rate as well as the possibility of extra repayment or early repayment of the entire loan. In this way, the client has enough time to decide whether or not they will leave the bank or go elsewhere, whether they will make an extra payment and how much, and they can also get resources to pay off the entire loan.
I know from experience that 2 months seems like a long time, but the reality is that if a person wants to go, for example, for a better offer in another bank, the process of approving a new loan also takes some time. The basic foundations also need to be prepared. I recommend that the client decides, within 2 weeks of receiving the letter, whether or not he or she wants to make a change, and that he or she may also take action in this respect... The best conditions will be given to the one who can choose, and time is money.
The truth is that the client will make the most of these changes if he or she thinks and acts in advance. Our clients can rely on us doing so, and they can do what they live or enjoy, without the fear of missing an important date.
Let us know and we will gladly notify you of the date of your mortgage fixation.
Martin Barus, 18.11.2012
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