Quick Summary
Early repayment (German: Sondertilgung) is an unscheduled payment in addition to your regular loan installment. It allows you to pay off a loan faster, shorten the term and save significant interest. For German mortgages, typically 5-10% of the loan amount per year.
Definition in Detail
Early repayment refers to an additional payment on a loan that goes beyond the agreed regular installments. It serves to pay off the loan early and reduces the remaining debt (principal balance).
For mortgages in Germany, the right to early repayment must be contractually agreed. Common arrangements are:
- 5% per year: Standard at most banks (free)
- 10% per year: Often with a small interest premium
- Unlimited: With some providers, usually with an interest premium
Benefits of Early Repayment
Financial Benefits
- • Significant interest savings
- • Shorter loan term
- • Faster debt freedom
- • Flexibility with lump sum payments
Practical Benefits
- • Use bonuses, inheritances, etc.
- • No fixed payment dates required
- • Lower remaining debt for refinancing
Calculation Example: Savings through Early Repayment
Starting point: consumer loan of EUR 20,000, interest rate 6.5 % p.a., term 60 months, monthly instalment EUR 391.32 (fictitious example, prepayment charge not included)
| Scenario | Without Early Repayment | With EUR 3,000 after 12 months |
|---|---|---|
| Term | 60 months | 51 months |
| Total Interest | approx. EUR 3,479 | approx. EUR 2,682 |
| Savings | — | approx. EUR 797 |
Result: One extra payment of EUR 3,000 after 12 months saves around EUR 797 in interest and shortens the term by 9 months. A bank may charge a prepayment compensation of at most 1 % of the amount repaid early (Section 502 (3) BGB), here at most EUR 30.
Tips for Early Repayment
Secure early repayment rights
When signing, agree to at least 5% early repayment per year – even if you don't plan to use it now.
Consider timing
Make early repayments as early in the year as possible to maximize interest savings.
Keep reserves
Only repay surplus capital – keep an emergency reserve of 3-6 monthly salaries.
Check alternatives
With very low interest rates, investing may be more profitable – compare loan interest and expected returns.
Frequently Asked Questions
How much early repayment is typical?
For mortgages in Germany, 5% to 10% of the loan amount per year is typical for early repayment.
Is early repayment always worthwhile?
Yes, in most cases. Early repayments reduce the remaining balance and thus the total interest costs. Exception: If alternative investments yield a higher return than the loan interest rate, investing may be more profitable.
What does early repayment cost?
Within the agreed early repayment allowance, there is no cost. For payments beyond this or for loans without early repayment rights, an early repayment penalty may apply.
When is the best time for early repayment?
The earlier in the year an extra payment is credited, the lower the interest-bearing balance for the rest of the year. Whether and when you may pay depends on the contract; many lenders allow extra payments only on agreed dates.
Can I make early repayments on any loan?
Not automatically. For consumer loans, Section 500 (2) BGB allows early repayment at any time; a prepayment compensation is only due if a fixed borrowing rate was agreed, and it is capped at 1 % of the amount repaid early (0.5 % if less than one year of the term remains, Section 502 (3) BGB). For mortgages, the early repayment right must be agreed in the contract.
Legal Notice
Early repayment of consumer loans is governed by Section 500 (2) BGB; a prepayment compensation is capped under Section 502 (3) BGB. For mortgage loans with a fixed borrowing rate, early repayment during the fixed-rate period requires a legitimate interest or a contractual early repayment right. Status: 26 August 2026.