Is it worth paying off my mortgage early in Portugal?
| Monthly instalment | €800.06 (unchanged) |
| The loan ends earlier by | 2 years and 8 months |
| Early repayment fee | − €50.00 |
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How it was calculated
Compares the interest you pay until the end with and without the early repayment. Shortening the term usually saves more interest. Lowering the payment gives you breathing room every month.
Before paying off early, make sure you have an emergency fund. Money put into the loan is not easy to get back.
Example: you owe €100,000 over 20 years at 3.8% and pay off €5,000 early with a 0.5% fee, which is €25. If you shorten the term, the payment stays at €595.49, the loan ends 1 year and 5 months sooner and you save €5,378 in interest. If you lower the payment, it drops to €565.72, €29.77 less a month, and you save €2,121 in interest.
Frequently asked questions
Is it better to reduce the term or the payment?
Reducing the term usually saves more interest; reducing the payment gives your budget more breathing room every month.
How much does early repayment cost?
The fee is up to 0.5% on variable rate and up to 2% on fixed rate, depending on the contract.
Can I make early repayments on my mortgage whenever I want?
Yes. You can make partial early repayments at any point in the contract, for the amount you choose. You must tell the bank in writing at least 7 working days in advance.
Is mortgage interest deductible from IRS?
Only on loans for your own permanent home signed up to 31 December 2011. For those, you deduct 15% of the interest paid, with a cap that depends on your income. On newer loans, interest does not count for IRS.
Does paying off early in the loan save more interest?
Yes. Early on, the debt is larger and there is more time left, so each euro you repay stops earning interest for more years. The same amount repaid near the end of the term saves less interest.