Partial vs. Full Early Repayment 2026

You received an unexpected sum of money — an inheritance, a bonus, the sale of a property — and you are considering repaying part of the mortgage or the entire amount. The decision between partial and full repayment significantly affects the total cost and your flexibility. Here is the complete guide for 2026.

Partial Repayment — What It Means in Practice

Partial repayment reduces the principal balance, and you can usually choose whether to shorten the loan term (while keeping the same monthly payment) or reduce the monthly payment (while keeping the same term). In most banks, a partial repayment of up to 10% of the loan balance once a year on a prime track does not incur any fee at all.

Full Repayment — Closing the File Completely

Full repayment closes the entire loan at once. In tracks with a capitalization fee (fixed, linked to the index), this is the decision point where you pay the full fee on the remaining balance — therefore, full repayment generally involves a higher one-time cost than several partial repayments spread over time.

Comparison Example

Suppose you received ₪300,000 unexpectedly, while you have a mortgage of ₪1,000,000 in 3 tracks. Partial repayment from the track without a fee (prime) saves you immediate interest without additional cost. Full repayment of all ₪300,000 from a fixed track, on the other hand, may include a capitalization fee of thousands of shekels if the market interest has decreased since signing — it is advisable to check the exact calculation with the bank before deciding where to "put" the money.

When is Partial Repayment Preferable?

When you have a significant early repayment fee on some of the tracks — partial repayment from a track without a fee (usually prime) saves interest without paying a penalty.
When you want to maintain flexibility — full repayment "locks" you in, while partial repayment leaves you the option to refinance or repay more in the future.

When is Full Repayment Preferable?

If you have enough money to close the entire loan, and the interest on your remaining balance is significantly higher than the interest that the available money could yield elsewhere (for example, in a solid investment) — full repayment eliminates the risk and the cost of future interest completely, despite the one-time capitalization fee.

A Common Mistake to Avoid

A common mistake is to automatically repay the track with the highest interest rate, without checking the capitalization fee on that track — sometimes a track with a lower interest rate but without a repayment fee (like prime) saves more net money.

What Happens to the Repayment Schedule After Partial Repayment

The bank is obligated to provide you with an updated repayment schedule immediately after partial repayment, showing exactly how the decision (shortening the term vs. reducing the payment) affects the future payment balance. It is advisable to request both options in writing before deciding, and not to rely on verbal estimates.

Combining Partial Repayment Across Multiple Tracks

If you have several tracks in the mix, it is possible (and often advisable) to repay different parts from each track according to their specific fees — you do not have to choose one "main" track for repayment. This way, you can maximize savings while minimizing fees.

Frequently Asked Questions

How do you know exactly how much the capitalization fee will be?
You should request an updated calculation from the bank — the fee depends on the current interest rate gap and the time remaining, and it changes daily.

Is it better to shorten the term or reduce the payment in partial repayment?
It depends on your goal — shortening the term saves more interest over time, while reducing the payment improves your current monthly cash flow.

Is there a limit on the frequency of partial repayments?
Usually yes — the fee exemption generally applies once a year, beyond that an additional fee may apply.

Should you consult with a mortgage advisor before significant early repayment?
Definitely — an independent advisor can accurately calculate the breakeven point between the fee and the savings, and sometimes find a smarter combination between the tracks than the default option the bank offers.

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