People in Slovakia can pay off their mortgages faster as of July 1, and without extra fees. (source: SME - Marko Erd)
People repaying their mortgage will profit from more flexibility in regard to their instalments as of this weekend.
MPs have approved a change that makes the early repayment of a mortgage possible every month without a fee. The change was adopted by 79 of 146 lawmakers. The Hlas and Smer MPs, who describe themselves as social democrats, did not back the proposal.
The change will come into force on July 1.
30 percent of the principal amount
Until the end of June, clients can have repaid their mortgage without having to pay an early repayment charge in two situations: either at the end of the fixation period when the bank changes mortgage conditions (a client could repay the entire mortgage without additional costs); or around the date when a mortgage deal was concluded (no more than 20 percent of the principal amount can be repaid free of charge). Otherwise, the Pravda daily notes, a bank can charge clients with a fee of up to 1 percent.
Starting from July 2023, clients can pay extra mortgage instalments every month without being charged by their bank, but this amount cannot exceed 30 percent of the principal amount in one year.
A case in point: if a client has a €100,000 mortgage, they can repay €30,000 in extra instalments. Every month, the client can thus repay €2,500 extra.
Banks against flexibility
MPs who submitted the change to the house have argued that this is how people can be protected against rising interest rates. As several media outlets have reported, the fixation period will change in the coming two years for more than 370,000 people in Slovakia. As a result, people’s current mortgages could become more expensive and people could struggle to repay their mortgage.
Banks do not agree with the flexibility MPs have provided people with. They argue that they also have to borrow money to provide people with mortgages, but they do not have an early repayment option.
