Calculate prepayment penalty
If a borrower wants to repay the loan prematurely or withdraw from the loan agreement, an early repayment penalty usually has to be paid.
While borrowers can terminate a variable rate loan at any time with three months notice, this is a bit more difficult for fixed rate loans. A termination is then possible at the earliest after 10 years and a notice period of 6 months.
Anyone who now wants to dissolve his loan non-stop, of which the bank demands compensation. With this so-called prepayment penalty, a bank equalizes the interest loss from the early loan repayment.
With our prepayment calculator you can quickly, conveniently and easily determine the amount of compensation you would have to pay to your bank.
The Prepayment Compensation Calculator – so use it
To calculate the prepayment penalty, you need two things. On the one hand the loan contract, on the other hand the information, how high the remaining debt on the date of the transfer will be. You can find out this number from your bank.
The data input
- First of all, it must be clarified whether the date of the replacement is identical to the date of installment payment.
- Which date you choose is up to you. In the next step, the information of the bank, how high the remaining debt after payment of the due installment fails.
- To determine the exact development of the loan, you must now enter the full loan payment. This information can be found in the account statements for their mortgage lending.
- The end of the debit interest rate can be found in the loan agreement, as well as the amount of the interest rate and the monthly installment.
- With this data can already make an initial calculation of the possible prepayment penalty. The fine grinding is carried out by the “optional information”.
- Was there an option to make a special repayment? If so, the bank must take this into account when calculating the costs. This also applies if you have actually made a special repayment.
- The frequency of installment payments is reflected in the annual percentage rate of charge.
- The questions about the risk savings, the margin reimbursement, the reinvestment rate, the amount of the administrative costs and the one-time processing fee can only be answered by your bank, if it wants to.
As you can see, there are three positions that lower the amount of the prepayment penalty.
- First of all, the gross interest loss of the bank is shown by the early redemption.
- The agreed interest includes a so-called risk premium for possible loan default. Since you are canceling the loan, the bank no longer has to expect you to be in arrears, so you should not include this risk premium.
- The same applies to the administrative costs. These were also calculated in the interest rate. However, where there is no loan, there are no administrative costs.
If you do not change the bank, just the loan, the bank must credit them with the margin. It is the difference between their interest and the return on the deposit from which the loan was financed.
It can not be ruled out, however, that the bank will charge a processing fee for early redemption. This will be added to the subtotal, at the end is the amount you have to pay as a prepayment penalty.
When is a prepayment penalty payable?
Prepayment Compensation for early repayment by borrower
If the borrower pays back his loan prematurely, the lender may, according to § 502 BGB (German Civil Code), demand adequate compensation for the interest loss directly incurred as a result of the early repayment or other costs such as processing fees for the early repayment.
Prepayment Compensation even if terminated by the Bank
If the bank terminates the loan to a borrower during the fixed interest period due to default in payment, it can, in accordance with § 280 para. 1 BGB, also demand a so-called counterfeiting prepayment penalty as compensation for the lost interest income. This is also underlined by a judgment of the Higher Regional Court of Stuttgart dated 11.02.2015 (Ref. 9 U 153/14). In this case, the judges ruled that § 497 para. 1 BGB should not be interpreted in such a way that the bank could only demand default interest after termination. According to the Higher Regional Court Stuttgart, the period for which the early repayment penalty can be demanded begins with the termination and not only with the date of repayment of the loan.
How high may a prepayment penalty be?
The following limits apply:
- The prepayment penalty may not exceed 1.00% of the prematurely repaid amount. If the period between agreed and early repayment does not exceed one year, it may not exceed 0.50% of the early repayment amount.
- The prepayment penalty may not exceed the amount of the loan interest that would have been payable between the agreed and the early repayment by the borrower.
When is a prepayment penalty excluded?
There is no entitlement to prepayment penalty if
- the early repayment is made from a residual debt insurance or
- if insufficient information was provided in the loan agreement regarding the term, the right of termination by the borrower or the calculation of the prepayment penalty.
The financial calculators provided on this portal under the section Computer Collection are own developments that have been constructed strictly according to regular formulas of financial mathematics. Nevertheless, the results serve only as guidelines and orientation. We assume no liability for the correctness. Are you interested in the calculator as a white-label solution? Please feel free to contact the editors.