GIPE Newsletter (Nº24.191) November, 21th 2025

TAXES:

IS IT ADVISABLE TO PAY OFF YOUR MORTGAGE?

If you purchased your primary residence before 2013, you can benefit from the income tax deduction for home purchases. Therefore, it is not advisable to act too hastily. Remember that your mortgage payments allow you to apply this deduction each year and, consequently, reduce your tax bill. Furthermore, unless you have agreed otherwise, the bank usually charges a commission of around 1% for early repayments.

It is preferable to optimise the amount paid.

Higher contributions

What you can consider is allocating part of your money to increasing the annual loan instalments, up to the maximum deductible limit of €9,040. This will allow you to take full advantage of the deduction for your primary residence on your income tax return.

Note: If you purchase the property together with your partner or spouse and you file separate income tax returns, you can increase the instalments paid between the two of you to a total of €18,080 per year.

Example

You and your spouse took out a mortgage that ends in six years, with an outstanding capital of €70,170 and a monthly payment of €1,074 (€12,888 per year).

Note: You have now received some extra income and have the money you need to pay off the loan, so you are considering several alternatives:

Option 1: Do nothing and let the mortgage run its course for six years.

Option 2: Repay the €70,170 in a single payment and cancel the mortgage completely, paying the bank a commission of €701 (1%).

Option 3: Increase the monthly payment to €1,502 (€18,024 per year), which would allow them to pay off the loan in 4 years and 2 months.