Early Mortgage Repayment 2026: When and How Much

You have some money saved up and you're wondering whether it makes sense to pay off your mortgage early? It is one of the most common financial questions in Italy, where over 3 million families have an active mortgage. Early repayment can save thousands of euros in interest, but it is not always the best choice. In this guide, we analyze when it makes sense, how to calculate the savings, what penalties apply, and how to choose between full and partial early repayment.

What is early mortgage repayment

Early repayment is the return of the remaining balance (or a portion of it) before the natural end of the mortgage term. It is divided into:

• Full early repayment: you return the entire remaining balance and close the mortgage
• Partial early repayment: you make a lump-sum payment that reduces the remaining balance, but the mortgage continues with a lower payment or shorter term

The right to early repayment is guaranteed by Italian law. Article 40 of the Banking Consolidated Act (Legislative Decree 385/1993) establishes that the borrower may repay the mortgage early at any time.

Penalties: when they apply and how much they cost

The issue of penalties is crucial. The regulations have changed over time:

Mortgages taken out after February 2, 2007

For primary residence mortgages taken out after this date, the Bersani Decree (D.L. 7/2007) established that no early repayment penalties apply. This applies to both full and partial early repayment.

Mortgages taken out before February 2, 2007

For older mortgages, penalties were reduced by the ABI-Consumer agreement of May 2, 2007. The maximum penalties are:

Penalties are calculated on the remaining balance at the time of repayment.

Example: penalty cost

Fixed-rate mortgage taken out in 2005, remaining balance of 80,000 euros, repayment in the second half of the term. Maximum penalty: 1.50%.

Penalty cost: 80,000 × 1.50% = 1,200 euros

This cost should be compared with the interest savings to determine whether the transaction is worthwhile.

How much you save: calculating the interest

The main savings from early repayment comes from future interest you will no longer pay. This savings is greater when:

• The larger the amount paid early
• The longer the remaining mortgage term
• The higher the interest rate
• The earlier you are in the mortgage term (when the interest portion is larger)

Savings calculation example

Consider a mortgage with these characteristics:

• Original amount: 180,000 euros
• Term: 25 years (300 payments)
• Fixed rate: 3.50%
• Monthly payment: 901.59 euros
• Payments already made: 60 (5 years)
• Remaining balance: approximately 159,700 euros

Scenario 1: Full early repayment after 5 years

• Remaining balance to pay: 159,700 euros
• Interest already paid in the first 5 years: approximately 29,195 euros
• Interest you would have paid over the remaining 240 payments: approximately 56,681 euros
• Total savings: 56,681 euros (minus any penalty)

Scenario 2: Partial early repayment of 30,000 euros after 5 years

With an early payment of 30,000 euros, the remaining balance drops to 129,700 euros. At this point you have two options:

Option A - Reduce the payment (same term):

• New payment: approximately 731 euros (savings of 170 euros/month)
• Total interest savings: approximately 10,800 euros

Option B - Reduce the term (same payment):

• New term: approximately 16 years and 2 months (instead of 20 remaining years)
• Total interest savings: approximately 17,400 euros

As you can see, reducing the term saves approximately 6,600 euros more than reducing the payment. To calculate the exact savings in your situation, use our early mortgage repayment calculator.

Full vs partial repayment: pros and cons

Full early repayment

Advantages:

• Complete elimination of debt and monthly payments
• Maximum interest savings
• Cancellation of the lien (after the notarial procedure)
• Complete financial freedom

Disadvantages:

• Requires a large amount of liquidity
• You lose the tax deduction on mortgage interest (19% on up to 4,000 euros/year for primary residence)
• You lose the liquidity that could be invested at returns higher than the mortgage rate

Partial early repayment

Advantages:

• Reduces debt while maintaining remaining liquidity
• Flexibility to choose between payment reduction or term reduction
• Can be repeated multiple times over the years

Disadvantages:

• The mortgage continues with its associated costs (insurance, management fees)
• Interest savings are proportionally lower

When early repayment makes sense

Early repayment is most advantageous when:

1. You are in the first half of the mortgage term: this is when the interest portion is highest. Repaying a mortgage with only 3-4 years left produces modest savings because most of the interest has already been paid.
2. The interest rate is high: with a rate of 4-5%, the savings are significant. With a rate of 1-2%, it might be better to invest the money instead.
3. You don't have better investment alternatives: if your mortgage has a 3% rate and you can invest at a 5% net return, mathematically it makes sense to invest. But this assessment must account for risk.
4. You don't have more expensive debts: before repaying a 3% mortgage, it makes sense to pay off a 7% personal loan or a 15% revolving credit card balance.

When it does NOT make sense

• You are in the last quarter of the term: most of the interest has already been paid
• You have a very low rate (below 2%): inflation could "erode" the debt for you
• You need liquidity: don't empty your bank account to pay off the mortgage. Always maintain an emergency fund of at least 6 months of expenses
• You have the 19% deduction on mortgage interest and it benefits you fiscally

The practical procedure

Full early repayment

1. Request the payoff statement from the bank: indicate the date you intend to make the payment. The bank will calculate the remaining balance, accrued interest up to that date, any penalties, and fees.
2. Verify the statement: compare it with the amortization schedule and use our calculator to verify the numbers.
3. Make the payment: generally via bank transfer on the agreed date.
4. Obtain the discharge: the bank issues a notarial deed for the cancellation of the lien (or consent to cancellation). Since 2007, the cancellation occurs automatically and free of charge within 30 days of the bank's notification to the Land Registry.

Partial early repayment

1. Notify the bank of the amount you intend to pay and your choice between payment reduction and term reduction.
2. Make the payment according to the bank's instructions.
3. Receive the new amortization schedule recalculated accordingly.

Interest savings: comparative table

Let's see how much you save with a partial early repayment of 20,000 euros on a 150,000-euro mortgage at 3.20%, 25-year term, at different points in time:

As the numbers show, the same 20,000-euro payment produces savings almost 7 times greater when made after 2 years compared to after 20 years. This is because much more interest is paid at the beginning of the mortgage.

The alternative: mortgage transfer (surroga)

If your goal is to reduce the cost of your mortgage but you don't have the liquidity for early repayment, consider a mortgage transfer (surroga). With a mortgage transfer, you move your mortgage to another bank that offers a better rate, at no cost to the borrower. You can also switch from a variable to a fixed rate or vice versa.

A mortgage transfer is particularly advantageous if:

• Your current rate is significantly higher than market rates
• You are still in the first half of the mortgage term
• The remaining balance is substantial (at least 50,000-60,000 euros)

Tax deduction on interest: what you lose

For primary residence mortgages, interest payments are deductible at 19% on a maximum of 4,000 euros per year in interest. This means a maximum tax savings of 760 euros per year. By paying off the mortgage, you lose this deduction.

Example: if you pay 3,000 euros in interest per year, the deduction is worth 3,000 × 19% = 570 euros. This should be factored into the overall assessment of whether early repayment is worthwhile.

Frequently asked questions

Can I repay the mortgage early at any time?

Yes, the law guarantees your right to repay the mortgage at any time, either fully or partially. The bank's consent is not required. However, it is advisable to communicate your intention at least 30 days in advance to allow the bank to prepare the payoff statement.

How long does it take the bank to cancel the lien?

After full payment of the debt, the bank has 30 days to notify the Land Registry of the mortgage payoff. The lien cancellation occurs automatically and without notary fees (since 2007, thanks to the Bersani Decree). The actual cancellation may take a few additional weeks.

Is it better to repay the mortgage or invest the money?

From a purely mathematical standpoint, it makes sense to invest if the expected net return on the investment exceeds the mortgage rate. But risk must be considered: the savings from repayment are certain, while investment returns are not. As a rule of thumb, if the mortgage rate is above 3-3.5%, early repayment is often the more prudent choice.

Can I use my severance pay (TFR) to repay the mortgage?

Yes, you can request an advance on your TFR for the purchase of a primary residence (up to 70% of the accrued TFR, after at least 8 years of employment). You can also use the TFR upon termination of employment to pay off the mortgage.

Does early repayment really cost nothing for mortgages after 2007?

For primary residence mortgages taken out after February 2, 2007, there are no penalties. However, there may be small ancillary costs such as fees for the closing bank transfer or administrative charges (generally 50-100 euros). Check your contract for details.

Can I make multiple partial early repayments?

Yes, you can make partial early repayments whenever you want, with no limits. Each time, the bank will recalculate the amortization schedule. This strategy is useful for those who receive annual bonuses, inheritances, or other extraordinary income and want to progressively reduce their debt.