The withdrawal fee or compensation is an amount some banks charge customers when a loan is cancelled or repaid before the agreed maturity date, either partially or in full. This represents lost earnings for the bank, with the compensation corresponding to the interest it will stop receiving.
This is really compensation rather than a fee, as the entity is no longer being paid for a service it has provided; instead it is being compensated for the damage resulting from the loan ending sooner than agreed. This is why some banks charge this compensation.
The withdrawal fee compensates two types of variables:
Compensation based on the date the mortgage was arranged
There are limits to this compensation based on when the debt is repaid and when the mortgage was arranged:
- For variable-rate mortgages signed before 2007, entities can charge up to 1% of the principal repaid, providing this repayment is not due to subrogation of the mortgage.
- There have been two types of limits for both fixed and variable-rate mortgages since 2007:
- If the repayment occurs during the first five years of the loan, 0.5% of the repaid amount is charged.
- If repayment occurs after the first five years, this withdrawal fee is 0.25%.
Compensation based on the interest rate
The law also establishes an interest rate risk fee for fixed-rate and mixed mortgages. This compensation can only be charged on mortgages with a term of more than 12 months and the financial institution can agree the amount involved.
This compensation can only be charged when the repayment of the debt causes a loss to the entity, i.e. when interest rates are lower than those being paid at the time of the early cancellation or repayment.