Repay the mortgage early or keep money in the account?

What happens when I repay part of the loan?

You can repay part of the loan at any time, in any amount. It is done on the date of a repayment. You must tell the bank at least 7 business days in advance.

After your request, the bank must tell you in writing what the repayment will do to your loan.

As a rule, the monthly repayment goes down and the term stays the same. If you would rather shorten the term, you must ask the bank. That is a renegotiation and only goes ahead if you both agree.

How much does it cost to repay early?

The bank may charge a fee, with a maximum set by law:

• on a variable rate, up to 0.5% of the amount you repay;
• on a fixed rate, up to 2% of the amount you repay.

Your contract may set a lower fee, or none. There is no fee if the reason is the death, unemployment or work relocation of a loan holder.

Besides the fee, the bank may only charge what it paid for you to registries, notaries or the tax authority.

How much does money in the bank earn?

Interest on deposits is taxed. The rate is 28% if you are tax resident in mainland Portugal, and 19.6% in the Azores and Madeira.

So a deposit at 2% earns 1.44% net in mainland Portugal. That net rate is the one to compare with the interest on your loan.

An example with the sums

You owe €150,000 at 3%, with 25 years left to pay. You have €10,000 of spare savings.

If you repay the €10,000, your repayment falls from €711 to €664 a month. In the first year, you pay about €296 less interest. By the end, it is about €4,226 less interest.

On a variable rate, the fee is at most €50. On a fixed rate, it can reach €200.

If you leave the €10,000 in a deposit at 2%, you get €200 a year before tax. After 28% tax, €144 is left.

In this example, repaying early pays off. If your money earned more than the loan costs, after tax, the sums would flip. These are example figures, with rates unchanged for the whole term.

First, the emergency fund

Money you use to repay the loan is no longer available. Keep a reserve for the unexpected first, such as job loss, illness or a sudden bill. See the guide What should be the ideal amount for my Emergency Fund?

Can I use a retirement savings plan to pay the loan?

You can use a retirement (PPR) or education (PPE) savings plan to pay loan repayments. The loan must be for the home you live in. Only amounts paid in at least 5 years earlier come out without losing the tax benefits.

Where FINOVA helps

If the aim is to pay less interest, also compare moving your loan to another bank. See the guide Can I transfer my mortgage to another bank? In the mortgage repayment calculator you can see the repayment for a different amount.

Sources

• Banco de Portugal — How to repay and transfer
• Banco de Portugal — How to renegotiate
• Banco de Portugal — Time deposits: interest rates
• Todos Contam — Saving and investing (in Portuguese)

Sources checked on 22 September 2026.