Written and professionally reviewed by the Ailon Financing Solutions team
Why is there a fee at all?
It sounds unfair: I took a loan, I want to pay it back early, why should I pay for it?
The logic is like this. When the bank gave you a mortgage with a fixed interest rate, it raised money for a corresponding period and at a certain cost. It will price profit throughout the period. Early repayment breaks this calculation.
If since then the interest rate in the economy has decreased, the bank will have to lend the money it received back at a lower interest rate. The commission compensates him for the gap.
Hence the important rule: The commission is derived from the direction of the interest rate movement, not from your desire to close.
What does the commission consist of?
In general, there are several possible components:
capitalization fee. the significant component. Calculated from the difference between the interest rate in your agreement and the average interest rate in the economy today for a similar course, multiplied by the balance of the debt and the balance of the period. This is the component that can reach tens of thousands of shekels.
operational fee. A small and fixed amount, negligible.
linkage differences. In index-linked tracks, until the maturity date.
No notice fee. Easily avoided: notify the bank in advance as required.
In practice, when we talk about the "fine", we almost always mean the capitalization fee.
Where the commission applies and where it does not
| orbit | capitalization fee |
|---|---|
| Prime | usually not |
| Variable interest rate, near an exit station | usually not |
| Variable interest rate, not fixed | It's possible |
| Non-linked fixed interest rate | It is possible, and sometimes significant |
| Fixed fixed interest rate | It is possible, and sometimes significant |
This is exactly why the composition of the mix is not just a question of interest. An all-permanent mix seems safe, but it also locks you in: any future changes will cost money.
Exit stations: the tool that people don't know
Variable interest rates have fixed dates when the interest rate is updated. these the departure stations, and in which you can pay without capitalization fee.
A station every year, every two years or every five years, depending on the route.
Those who know when their stations are can schedule recycling and save the entire fee. Those who don't know, just pay.
Check your stations. The information is in the mortgage agreement. If you're considering recycling and the next stop is in four months, sometimes it's worth waiting.
How do you check how much it will cost?
The process is simple and free:
- Contact the bank and ask Approval of balances for disposal
- The bank issues a document with the balance of the debt and the details of the fee, as of a certain day
- The document is valid for a limited number of days
Without this document, any feasibility calculation is a guess. No serious consultant will recommend recycling without seeing it.
The calculation that determines
The only question that matters:
Are the expected savings over the remainder of the period greater than the commission and process costs?
If the answer is negative, do not recycle. point.
And here it's worth saying something: a consultant who receives a fee for recycling and tells you it's not worth it, is exactly the consultant you want. Whoever recommends a broker without presenting the calculation against the commission works for him, not for you.
Real ways to reduce the fee
Partial payment instead of full. If only one track has become expensive, recycle only that one. You will only pay a fee for it.
Timing for departure station. A few months of waiting can save tens of thousands of shekels.
Spread over time. In some cases, staggered repayment reduces the total fee.
negotiation. The fee is calculated according to a formula, but the conditions you will receive at the new bank are negotiable, and sometimes a bank that wants you is willing to cover part of the cost with a better interest rate.
How to avoid the problem in the first place
The smartest thing is to think about it on the day you take the mortgage, not five years later.
A mix built with future flexibility in mind leaves doors open for you. A mix built only according to the lowest interest rate today may lock you in.
The question you should ask the consultant while building the mix: "If in four years I want to change something, how much will it cost me?"
Those who do not have a neat answer to this question have not built a mix for you. He chose interest rates for you.
The bottom line
An early payment fee is neither a fine nor a penalty. It is a calculation, and it can be checked in advance and for free.
Before you recycle, ask for clearance balances. If the savings are greater than the fee, go ahead. If not, wait for the next stop.
A practical test before a decision
Enter the loan data bThe mortgage cycle calculator And compare the expected savings, costs and payback period. For the full context, read also The mortgage cycle guide.
