Should I repay the loan in advance? Photo courtesy of vision china
With the change of the property market, more and more people repay their loans in advance, and even there are long queues for this purpose, and many young people have joined them. Of course, the choice of early repayment is to cut interest rates, but experts remind that "early repayment can not blindly follow the trend." We should repay the loan rationally, not only considering our own affordability, but also considering the future changes in mortgage interest rates and making comprehensive judgments. Some experts also suggested: reduce the interest rate of stock loans or allow buyers to convert fixed interest rates into floating interest rates.
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The "loan repayment tide" of property buyers in advance is intensifying.
At 0:00 on February 1st, Chang Wei, a post-90s individual industrial and commercial household from Xuzhou, Jiangsu, once again stared intently at the mobile banking App page of a state-owned bank, refreshing, clicking and refreshing … … This has been repeated many times, but I still didn’t grab the February prepayment quota issued by the bank. Chang Wei said, "I waited until 0:30, but it seems that there is no quota around 0:10."
Originally, Mr. Huang, a post-90 s lawyer who lives in Wuhan, has successfully made an appointment for early repayment. However, only three days before the repayment date, he was informed by the bank that he could not repay.
They are just the "microcosm" of the difficulty for buyers to repay loans in advance. On social platforms, many property buyers shared their experience of making an appointment for prepayment, among which many people have scheduled the repayment date to September this year.
Bank employees have to queue up to repay loans in advance.
Chang Wei is not on a whim to repay the mortgage in advance. In the past two years, he has always had this idea. During the epidemic, his income was halved and unstable. Among them, his income was zero for three months, but he never dared to break the loan, which also made him want to repay the loan in advance.
In 2018, Chang Wei took out his savings, plus 1.1 million yuan from his parents, and borrowed 300,000 yuan from the bank at a loan interest rate of 5.7% before buying a wedding room. Now, Chang Wei’s mortgage principal is more than 260,000 yuan, and most of the tens of thousands of yuan paid in front are interest, and the principal only accounts for a small part. According to the contract, it will be another four years before the principal part of the monthly repayment will exceed the interest. He said, "This means that I have to work for the bank for another four years."
He decided to use the savings of 200,000 yuan to repay the loan, shortening the loan period of the remaining 60,000 yuan to 36 months, and then he only needed to pay more than 5,000 yuan of interest. "Compared with the original interest of 160,000 yuan, this is a fraction."
Years ago, Chang Wei saw on the mobile banking App that he could apply for early repayment, but the amount of early repayment after the year showed that it was full. When he went to the bank outlet, he saw a notice posted at the outlet about the need to make an appointment at the bank counter to repay the mortgage in advance, which read: "Our bank will arrange the customer to repay the loan in advance according to the requirements of the national loan scale control (usually in about 3 months)".
"This time, I have to pay more interest to the bank." Fortunately, Chang Wei successfully made an appointment to repay the loan in May this year. However, the reply from the staff of the bank outlets still left him with no bottom. "The staff asked me to come early in May, and the sooner I got more stable."
Just because you make a successful appointment to repay in advance does not mean that you can repay successfully. At the beginning of this year, Mr. Huang and his wife collected 450,000 yuan from relatives and friends and prepared to repay the mortgage in advance. On January 5th, he made an appointment at a bank outlet for repayment on February 6th. However, on February 3, he was told by the bank that the internal policy of the bank was adjusted, and the offline repayment window was closed, waiting for online approval, and the time was uncertain. He asked the account manager about the specific content of the bank’s internal policy, and the account manager said, "I don’t know."
For the above situation, the bank account manager asked Mr. Huang to find his own channel feedback. So, he complained to the relevant authorities and the bank consumer protection office.
Prior to this, Mr. Huang Applied for early repayment through the mobile banking app, indicating that he "failed to meet the repayment conditions". In fact, according to the contract, the repayment period is over 12 months, the repayment is at least 30,000 yuan in advance, and an appointment is made 30 days in advance, and the repayment can be made after approval by the bank. He has met these conditions. The online channel couldn’t get through, so he had to switch to the offline channel. Mr. Huang didn’t expect the road to repayment to be full of difficulties, as if he were going through "eighty-one difficult".
In view of the difficulty for some property buyers to repay loans, the reporter consulted the staff of the credit department of a provincial branch of a state-owned bank as a borrower, and said that the current area can make an appointment online, but it needs to be queued, which is estimated to be in April and May. He revealed to the reporter of China Youth Daily and China Youth Network that the bank’s control quota is fixed every month, and it will be gone when it is used up.
The bank staff also said that the income expectation of investment and financial management is not ideal now, and many people are not willing to put their money in the bank. "Our colleagues are ready to repay the loan in advance, and they are all waiting in line." Now there is no other way but to queue up. "Apply early, queue up early and repay the loan early," he said.
Don’t want to work for a bank?
"I don’t want to work for the bank." This is a common answer given by many property buyers about why to repay the loan in advance. They raise funds in different ways. Some people redeem their investments, some borrow money from relatives and friends, some people sell precious metals such as gold in their homes to repay their loans, and some people "operate" their mortgages into business loans through some housing agencies, reducing the mortgage interest rate … …
Since buying a three-bedroom apartment in Wuhan at the end of 2021, Mr. Huang and his wife have lived a life of "frugality". As long as they have money, they will save up to pay back the mortgage. Mr. Huang remembers that when they bought a house, they borrowed 1.36 million yuan in the form of "equal principal and interest". At that time, the mortgage interest rate was 5.78%, which was at a high level. They needed to repay 7963 yuan every month. He said, "We just need to live by ourselves and buy it at (mortgage) ‘ Peak ’ I also recognized it. "
At present, they have paid it back for 13 months, and the repayment amount has exceeded 100,000 yuan, but the principal is only about 18,000 yuan, and the rest is interest. Originally, Mr. Huang hoped to pay back 450,000 yuan before February 14 this year, but it was blocked. The interest of 450,000 yuan a day was 35 yuan, "one month’s interest is enough to pay one month’s heating bill". At present, he is still waiting for further feedback on the complaint. He is going to send a lawyer’s letter to the bank at the same time. "It is true that the bank defaulted first."
After 90, Zhang Ran said that the mortgage interest rate was 6.4% when she bought a house in Kunshan, Jiangsu a few years ago. At present, the mortgage interest rate in many areas has dropped to 3.8%. Today, she found that only a few hundred yuan of the monthly repayment amount of more than 2,500 yuan is the principal, and the interest actually exceeds 2,000 yuan.
In order to pay off the loan as soon as possible and engage in human resources work, Zhang Ran also works as a part-time teacher. In July last year, after she paid off the debts owed to her relatives, she repaid the 100,000 yuan she had saved to the mortgage. At that time, the repayment was smooth. She plans to continue saving money and pay off the loan in advance in two or three years, which can save more than 300 thousand yuan. "I only have one goal now, which is to repay the loan."
At the beginning of buying a house, Shasha, a 24-year-old sales assistant working in Shanghai, and her boyfriend were ready to repay the loan in advance at a constant rate to decompress for the future. In March 2021, Shasha and her boyfriend bought a 145-square-meter house with a loan of 1.22 million yuan in Kunshan, Jiangsu, and started a life of "A Tale of Two Cities". At that time, the mortgage interest rate reached 5.7%, and they needed to pay back more than 7,100 yuan per month, of which only about 1,300 yuan was the principal and the rest was all interest. She calculated an account, and if she repays according to the contract, she will have to pay more than 1.3 million yuan in interest in 30 years, which has exceeded the principal. She sighed, "The mortgage interest rate is too high."
In addition to the mortgage, the two will also give a total of 4,000 yuan in alimony to the elderly on both sides every month. At the same time, considering the uncertainty of career development and the cost of childbearing and education for future children, the future development of the industry is uncertain, and they choose to pay back 200,000 yuan every year. Last August, they repaid the principal of 200,000 yuan in advance.
In January this year, Shasha successfully made an appointment for early repayment again, because the bank made the payment the next month and she was still waiting for the deduction. In fact, Shasha has also considered converting mortgage loans into business loans to reduce mortgage interest rates. Some intermediaries have contacted them and said that they can provide "bridge payment" to help them apply for business loans. Finally, she gave up because she was worried that the risk was too great.
As a 19-year-old veteran in the real estate industry, Zhao Hengcheng, the manager of the "80-year-old house talk" from the media, also observed that some people will choose to convert their mortgages into business loans, that is, buyers will pay off their mortgages in advance at one time, and then mortgage their properties through the company to make loans, and the loan interest rate can be reduced to 3.7%. "In fact, there are many people in the market who take this as ‘ Gap ’ The intermediary, ‘ Bewitch ’ Everyone turned the mortgage into a business loan. "
However, it is clear that it is illegal for consumers to use "bridge funds" to settle their mortgages and then go to the bank to apply for operating loans to return the bridge funds. In view of the behavior of some illegal intermediaries to induce consumers to replace their mortgages with business loans, China Banking and Insurance Regulatory Commission official website had previously issued a reminder that this kind of operation hides the hidden dangers of breach of contract, the trap of high fees, the impact on personal credit information, the break of capital chain, and the violation of information security.
A staff member of the credit department of a state-owned bank said that banks will often check similar situations, and non-enterprise operators illegally switch to operating loans, which has certain default risks and legal risks. "If consumers are found to have misappropriated loans, they can recover the loans in advance."
Why is it difficult to repay the loan in advance?
Why is it difficult for ordinary people to repay loans in advance?
Li Yujia, chief researcher of Guangdong Housing Policy Research Center, pointed out that in recent years, the interest rate of bank loans to the real economy has dropped significantly, dropping by 34 basis points in 2022. Among them, in order to reduce the financing cost of small and medium-sized enterprises, the support for small and medium-sized micro-loan enterprises with lower loan interest rates should be maintained at a high level. As a result, mortgage is a high-quality asset for banks.
In 2022, the growth rate of individual housing loans declined. On February 3rd, the Statistical Report on Loan Investment of Financial Institutions in the Fourth Quarter of 2022 released by the People’s Bank of China showed that the balance of personal housing loans at the end of last year was 38.8 trillion yuan, up 1.2% year-on-year, and the growth rate was 10 percentage points lower than that at the end of last year. Li Yujia explained that in 2022, the application for incremental mortgage was declining. In the part of stock mortgage, buyers demanded to repay loans in advance, and the bank’s income was naturally affected.
Li Yujia has been paying attention to the "tide of repaying loans in advance". He found that in the first half of 2021, ordinary people were still "waiting in line for loans", but now they are "waiting in line for loans to be repaid". For more than a year, such a big contrast occurred, and the background was that the expectations of ordinary people for the property market reversed.
In January this year, the data released by the National Bureau of Statistics showed that in 2022, the sales of commercial housing was 13.3308 trillion yuan, down 26.7% year-on-year. In Li Yujia’s view, in the past, people generally believed that house prices would rise, and the return on assets was far greater than the cost of raising mortgage interest rates. Nowadays, after the people’s expectations of housing prices are reversed, the cost of the house is fully manifested and they are more sensitive to the mortgage interest rate. The continuous downward adjustment of mortgage interest rate is one of the reasons why ordinary people repay loans in advance. At present, mortgage interest rates in dozens of cities have entered the era of "3%". In addition, some cities have phased out the lower limit of the first home loan interest rate.
Professor capital university of economics and business and Zhao Xiuchi, vice-president and secretary-general of Beijing Real Estate Law Society, pointed out that mortgage contracts have a long term and are calculated with compound interest. Small changes in interest rates have a great impact on the borrower’s repayment burden, and it is understandable for consumers to reduce expenditure and increase income. In addition, many people chose a fixed interest rate when the interest rate of stock loans was converted. Now they find that the market interest rate is low, and they have suffered. Repaying the loan in advance is also a kind of compensation or correction.
Zhao Xiuchi also observed that some people choose to repay the loan in advance, and then apply for a loan with a lower interest rate. Few people stop lending after the real repayment. Zhao Xiuchi explained that the main reason was that the previous stock loan chose a fixed interest rate when the interest rate was converted, and its contract interest rate could not decrease with the decrease of the loan market quoted interest rate (LPR), so it was necessary to repay the loan in advance before applying for the loan to enjoy the current low market interest rate. Another reason is that the interest rate of the borrower’s mortgage contract is higher than the loan interest rate of small and medium-sized enterprises, and buyers may "detour" the loan.
"At present, ordinary people are not ‘ Retaliation ’ Pay back the mortgage. " Zhao Hengcheng believes that at present, the rate of return on financial investment is decreasing, and people with deposits lack good investment channels. At the same time, they find that the income brought by real estate is obviously lower than expected, and repaying loans in advance is a "timely stop loss" to a certain extent.
In Zhao Hengcheng’s view, banks are also one of the "pushing hands" of the "early repayment tide". Banks set many restrictive conditions for repaying loans in advance, such as paying liquidated damages, closing online channels, and long queues. He explained, "This restriction of banks will not only reduce everyone’s willingness to repay, but will stimulate everyone’s willingness to repay. Many people will have an idea of opposing interests: ‘ The more banks do this, the more worried they are about my repayment, and the more they will earn my interest, so they have to pay it back. ’”
In view of some repayment restrictions of banks, Zhao Xiuchi believes that according to the loan contract, early repayment by buyers will disrupt the bank’s capital plan, and it is normal for banks to charge a certain amount of liquidated damages, but there should be clear terms in the loan contract. She also pointed out that buyers have to wait a long time for prepayment, but there are more prepayment at present, so banks should improve their work efficiency and should not delay borrowers’ prepayment under an excuse.
Experts suggest lowering the interest rate of stock mortgage.
At present, many people are waiting to see whether to repay the loan in advance. In fact, not everyone is suitable for repaying loans in advance, and many experts call for "rational repayment".
Zhao Hengcheng pointed out that at present, these types of people are more suitable for repaying loans in advance. First, they have funds in their hands, but they have not found a good investment channel; Second, people with higher mortgage interest rates, especially those who are above 6% or even close to 7%; Third, for people with short repayment period, interest often accounts for the main part in the early repayment. He also pointed out that if the buyers have repaid the loan for more than a certain period of time, the interest part of the outstanding loan is very limited, and early repayment will not greatly reduce the cost of using funds.
At present, calculating how to repay the loan in advance is more cost-effective and has become a "compulsory course" for many property buyers. Generally speaking, there are three modes of prepayment, namely, prepayment in full, prepayment in part with the same loan term, and prepayment in part with shortened loan term. How much interest can be saved by repaying the loan in advance has a great relationship with the loan amount, prepayment ability, mortgage interest rate and repayment period of the buyers.
For example, property buyers borrow 1 million yuan from the bank at a loan interest rate of 4.3%, and the loan period is 30 years. Among them, according to the repayment method of equal principal and interest, they need to repay 4,948.71 yuan every month, with a total repayment amount of 1,781,500 yuan. Many banks stipulate that buyers can only repay in advance after one year. According to the calculation of repayment for 13 months, early repayment will be started in February this year, and one-time repayment can save 731,800 yuan in interest. If you choose to repay 200,000 yuan in advance and the repayment period remains unchanged, you can save 149,200 yuan by choosing the repayment method of equal principal and interest in the future, and you can save 246,600 yuan by choosing the method of average capital. Buyers still pay 200,000 yuan in advance, and the monthly payment amount remains unchanged. If the repayment period is shortened to 10 years, the repayment method with equal principal and interest will save 550,600 yuan, and if the repayment method in average capital is selected, the interest will be saved 562,600 yuan.
If the home buyers have a long repayment time, the interest that can be saved will also change obviously. Still under the above conditions, the buyer has already paid off the loan for 8 years and 1 month, so paying off in advance at one time can save 456,500 yuan; If 200,000 yuan is repaid in advance and the repayment period is shortened to 10 years, 307,900 yuan can be saved by choosing the same principal and interest, and 317,700 yuan can be saved by choosing average capital.
"Repaying the loan in advance can’t blindly follow the trend." Zhao Xiuchi also pointed out that the loan contracts of homebuyers vary widely, which need specific analysis. From a personal point of view, it is really necessary to repay the loan rationally, not only considering one’s affordability, but also considering the future changes in mortgage interest rates and making a comprehensive judgment.
Many people in the industry and experts told reporters that more people choose to repay in advance in order to cut interest rates. In this regard, some experts suggested: reduce the interest rate of existing loans or allow buyers to convert fixed interest rates into floating interest rates.
"As long as the mortgage interest rate is higher than the wealth management interest rate, as long as the house price is still falling and the residents expect the house price to fall, the motivation to repay the loan in advance will always exist." Li Yujia predicts that in the future, more cities will cancel the lower limit of mortgage interest rate, especially those with falling house prices. On the one hand, it is to shrink the inversion between mortgage interest rate and wealth management interest rate; On the other hand, it is to reduce the mortgage interest rate to cushion the decline in house prices. At the same time, the recent property market policy has turned more to demand-side bail-out, with the aim of encouraging everyone to buy houses and alleviating the expectation of falling house prices.
In addition, Zhao Xiuchi also suggested that, from the perspective of national policy, buyers who originally chose a fixed interest rate for existing loans should be allowed to switch to a floating interest rate based on LPR.
(At the request of the interviewee, Chang Wei, Zhang Ran and Sha Sha are pseudonyms)
Zhongqingbao Zhongqingwang Trainee Reporter Zhao Limei Jia Jiye