It is very likely that the biggest and most important purchase we make in life is buying our home.
At the time of signing our first mortgage we were thrilled to have reached a goal: we celebrate that event with the whole family, without even thinking that we are contracting a financial obligation that we will honor throughout our lives, and pay much more than its cost.
At first, there is no better feeling than having the keys to a home of your own: with the passage of time, that feeling fades and is replaced by the desire to get rid of your debts, which is not unreasonable, because the simple fact of reducing the expenses for interest on the debt is already a way to save.
In addition, you will feel emotionally safe, you do not owe anything to the bank and now you can say that housing is completely yours. But before doing it, you should first get rid of the debts with higher interest (for example credit cards or consumer loans), build an emergency fund (minimum to meet the expenses of 3 months of life), and review your retirement plan.
Canceling the mortgage before time will allow you to stop paying interest that is generated by spending more time paying.
However, the process to cancel the mortgage may have a cost and does not end with the payment of the last installment. We will explain some things you have to do and show you what kind of mortgages have no commission for early repayment.
Options to cancel the mortgage ahead of time
Proceeding to the early amortization of our mortgage loan and returning the entire outstanding capital does not mean that we can forget about our mortgage. And also that after the payment of the last installment must cancel the mortgage registry. There are three ways to do it:
- Make the management through the bank. Your bank can cancel your mortgage for you, with the objective that the house is free of charges and, in addition, there is no mortgage loan in your name that can limit you when requesting another mortgage or credit in the future. If you do so, in addition to the cost of the operation, you will have to pay the bank’s fees.
- Make the processing on our own. If you have a little time available to do the paperwork, you may be interested in canceling the mortgage on our own, which will allow you to save some money.
- Wait 20 years. If you do not want to do the process we can wait 20 years. And when two decades pass from the payment of the last installment of the mortgage, it is automatically deleted from the record. However, if you want to sell the house previously or request another loan, you must do the procedure.
Once you have proceeded to reimburse the outstanding capital in advance and to cancel you mortgage, you will have finished all the procedures.
How to cancel the mortgage on your own
If after prepaying mortgage, you decided for the option of doing the registration cancellation procedure on your account, you must follow the next steps and assume the corresponding cancellation costs:
- Ask for the certificate of zero debt. It is a document that your entity must give you for free and that certifies that you have paid the last installment of your mortgage.
- Make the writing of cancellation with a notary. With the document that they give you in the bank you will have to go to a notary so that it begins to prepare the writing of cancellation of the mortgage. The cost of this document, together with the notary’s fees, can amount to approximately 250 dollars, with a minimum of 90 dollars.
- Collect the deed of cancellation. Once you have complied, and when the notary notifies you that he already has your deed, you can go to sign it and pick it up. This document must also bear the signature of the bank’s attorney-in-fact.
- Register all documents. The last step will be to go to the Property Registry and deliver the form of the bank and the notarial deed. After a few days you can collect the documents in the same register and pay the corresponding fees for this procedure. This operation has a minimum cost of 24 dollars but will depend on the value of the mortgage.
After performing these steps, if at any time you want to sell your house or certify that it is not mortgaged, you can ask for a simple note that.
The cancellation of the mortgage is the total amortization of the mortgage loan or paying all outstanding installments before the stipulated time. On the other hand, when we speak of a partial amortization, we refer to when only part of the pending capital is anticipated and, therefore, you will have to continue paying the rest, although, yes, you will have shortened the term.
Whether you proceed to cancel the mortgage ahead of time or amortize part of it, the greatest benefit you will get is that you will reduce part of the interest charged to you for the money borrowed. You do that by reducing the term of return of your mortgage loan (fully or partially), you will pay sooner and, therefore, the cost of your mortgage will be lower.
In this sense, it is important to know that most mortgages have a depreciation system where during the first years a greater part of interest and less debt is paid, while in the last years the reverse situation occurs. Therefore, if you amortize at the beginning, you will further reduce the interest payable.