If you entered into a mortgage contract on or after 1 December 2016, or if you have an older contract and your new interest rate fixing period started after that date, you can pay off your mortgage early at any time without any penalty. In this case, the bank may only charge you for costs reasonably incurred. In March 2019, the Czech National Bank issued an opinion clarifying what these costs include. These are mainly administrative costs associated with early termination of the contract, which include, for example, the cost of the employee who handles the early repayment request, land registry fees, postage, costs associated with printing and copying documents, office supplies consumed, telephone charges and necessary notarial acts. In the event of early repayment, the bank cannot ask you to compensate for lost interest.
When is early payment free?
The Consumer Credit Act lists two situations where you can pay off your entire mortgage loan for free. These are as follows:
- three months before the end of the mortgage interest rate fixation,
- death, long-term illness or disability that prevents you from continuing to repay the mortgage.
You also have the legal option to make an extra mortgage payment of up to 25% once a year, one month before the anniversary date of the loan agreement (i.e. the date you signed the loan agreement).
Tip: For more information on refinancing your mortgage, see our articles on How to refinance correctly and What to look out for when refinancing your mortgage.