When to prepay, refinance or move a mortgage to another bank

Prepaying a mortgage, refinancing it or moving it to another bank can cut a lot from what you pay in interest, but only if the savings exceed what each move costs. This guide is for anyone who already has a mortgage loan in Costa Rica and wants to decide with numbers: how extra payments work, what to ask the bank, when a transfer pays off and what to do if the payment becomes a burden.

How do you make extra payments and how much interest do you save?

In Costa Rica, most mortgage loans are paid with a monthly installment that covers interest and part of the principal. Early in the loan, most of that installment goes to interest, because interest is calculated on a balance that is still high. An extra payment, by contrast, goes entirely to principal: every colón you pay in stops generating interest for all the months left on the loan. That is why the same extra payment yields much more in the first years than when little remains to be paid.

There are three common ways to prepay. The first is a one-off payment, which many families make with the aguinaldo (the year-end bonus), the salario escolar (the school-year bonus) or another bonus. The second is a periodic extra installment, for example once a year. The third is rounding the installment up every month. In any case, ask in writing for the money to be applied to principal and not as an advance on future installments: if the bank treats it as an advance, you skip a few months of payments, but the interest savings are much smaller.

How much you save depends on three things: the balance, the rate and the remaining term. The practical way to see it is to run the loan twice in the mortgage calculator, once with the current balance and once with the balance after the extra payment, and compare the total interest you would pay through the end. That difference is your real saving, and it is the number to set against any fee the bank charges for the extra payment.

After an extra payment, the bank usually offers two paths: keep the installment and shorten the term, or keep the term and lower the installment. Shortening the term saves more interest, because the loan ends sooner. Lowering the installment saves less, but it gives the monthly budget some breathing room. The table summarizes when each option makes sense.

What should you ask the bank before prepaying or paying off the loan?

The terms for extra payments vary among public banks, private banks, mutuales (savings and loan associations) and cooperatives, and also between one loan and another at the same institution. Before moving any money, ask for the answer in writing or check it in your contract. These are the questions worth asking:

If your plan is to pay off the loan in full, ask for a balance statement with the exact payment date, because interest accrues daily. After you pay, the bank issues the release and a notary files it with the Registro Nacional (National Registry) so the mortgage disappears from the property record. Until that registration is done, the property still shows the lien, which can delay a sale or a new loan. Confirm who chooses the notary and who pays the fees, which in practice usually fall on the borrower.

Is it better to prepay the mortgage or to save and invest?

Prepaying the mortgage is equivalent to an investment with a return equal to your loan rate: every colón paid in stops paying that interest. For saving or investing to be the better choice, that alternative's return has to beat the mortgage rate after taxes and fees, in the same currency and with a risk you are willing to take. A fixed-term deposit certificate with a rate lower than the loan's, for example, rarely wins the comparison.

The rate is not the only thing that matters. Money paid into the mortgage is not easy to get back: if you face an emergency tomorrow, the bank will not return the extra payment. That is why the usual order is first an emergency fund covering several months of expenses, then paying off the most expensive debts, such as credit cards or personal loans, and only after that making extra mortgage payments, since the mortgage is usually the cheapest debt a household has.

• In favor of prepaying: your rate is high or variable, you already have an emergency fund and you have no more expensive debts.
• In favor of saving: your emergency fund is thin, you expect large expenses or you have an alternative with a better net return in the same currency.
• In favor of waiting: consider whether you will sell the house soon or move the loan, and the extra payment would be subject to a fee.

Your housing plan also matters. If you plan to move in a few years, or to buy a second, smaller property and are already comparing cheap homes for sale in Costa Rica, having cash for the down payment may be worth more than the interest savings. When you sell, the mortgage balance is paid off from the sale price, so what you prepaid is not lost, but it stays tied up until then.

What is refinancing and how do you move a mortgage to another bank?

Refinancing means replacing your current loan with another on better terms. It can be done at the same bank, by renegotiating the rate or the term, or at another institution that buys your debt: the new bank pays off the old one and you owe the new bank, with the same house as collateral. It makes sense when the new rate is clearly lower, when you want to switch from a variable rate to a fixed one for a long period, or when the current term no longer fits your income. It makes less sense when only a few years remain on the loan, because the interest savings are already small.

Before shopping around, talk to your own bank. With a written offer from another institution in hand, many banks in Costa Rica improve the rate so as not to lose the customer, and an internal renegotiation usually avoids the appraisal, the notary fees and the registration of a new mortgage. If your bank does not budge, the transfer follows these steps:

1. 1
   Ask your current bank for a balance statement, your payment history and the early payoff terms.
2. 2
   Get quotes from two or three institutions: initial rate, rate after the fixed period, reference index, fees and insurance.
3. 3
   Submit the application with your documents: salary certificate or income statement, account statements, ID and property details.
4. 4
   Wait for the property appraisal, which defines how much the new bank will lend you.
5. 5
   Review the written loan offer and compare it with your current loan before accepting.
6. 6
   Sign before the new bank's notary: the old mortgage is released and the new one is created.
7. 7
   Confirm that the deed was registered with the Registro Nacional and that your previous bank closed the loan with no outstanding balance.

The appraisal is the step that surprises people most. If the value set by the appraiser is lower than you expected, the new bank may lend you less than the balance you owe and the transfer stops working. Before starting, it helps to have a realistic idea of your home's value: home prices in Costa Rica, by province and by canton, give a reference for what is being asked for similar properties, although the bank's appraisal is what counts.

What does switching banks cost and when do the savings make up for it?

A transfer has costs paid up front, while the savings arrive month by month. Ask each institution for a written breakdown; this table summarizes the usual items in Costa Rica:

To know whether the switch pays off, do three calculations. First, add up all the transfer costs. Second, work out how much you would pay in interest and insurance through the end with your current loan and with the new one, for the same balance and the same remaining term. Third, subtract: if the total savings do not comfortably exceed the costs, the switch is not worth the hassle. A quick way to see it is the break-even point: divide the costs by the savings on the monthly installment and you get the number of months the transfer takes to pay for itself.

That break-even point has to come well before the date you plan to sell or refinance again. If you want to move in a few years and are already looking at homes for sale in Costa Rica, the transfer may never pay for itself. Be wary of teaser rates, too: many offers set a low rate for the first years and then make it variable. Compare what you would pay over the whole term, not just the first period, and ask which reference index and which margin will apply afterwards.

When does it make sense to move a mortgage from dollars to colones?

A dollar mortgage paid with income in colones carries a risk that does not show in the rate: if the exchange rate rises, the installment rises in colones even if the rate does not move. For years, many households in Costa Rica took out dollar loans because the rate was lower, and some later faced installment increases they did not expect. Moving the loan to colones removes that risk: the installment is in the same currency you are paid in.

The switch makes sense mainly if your income is in colones, if many years remain on the loan and if you prefer a predictable installment even if the rate is somewhat higher. It makes less sense if you earn in dollars, for example because you work for a foreign company or rent to foreigners, or if the rate gap is so wide that the installment in colones does not fit your budget. When converting, the balance is moved to colones at the exchange rate on the day of the transaction, so timing also matters.

The process resembles a transfer: some banks convert the loan within the same institution and others treat it as a full refinancing, with an appraisal and a new deed. Ask for two simulations on the same date, one in each currency, and compare the installment, the total interest and the conversion costs. In colones, also check whether the rate is tied to the tasa básica pasiva (the basic deposit rate) or another index, because that defines how the installment will move.

What we would do before moving the mortgage

• We would ask in writing for the extra payment and payoff terms before moving a single colón.
• We would make extra payments to principal with the aguinaldo or the salario escolar only after having an emergency fund.
• We would negotiate first with the current bank, with a written offer from another institution in hand.
• We would move the mortgage only if the break-even point comes well before the date we plan to sell.
• If the installment no longer fits, we would request a restructuring in time and compare that installment with cheap homes for rent in Costa Rica before deciding whether to keep the house.

Frequently asked questions

How do you request a restructuring if the installment becomes hard to pay?

Approach the bank before you fall behind, not after: with your payments up to date you have more options and you protect your credit history. Ask for a meeting with the credit department, explain the change in your income with documents and request concrete options: extending the term, a grace period or a temporarily lower installment. Check that the restructuring does not capitalize overdue interest without telling you and ask for the new payment schedule in writing. If the installment still does not fit, compare it with what homes for rent in Costa Rica cost before deciding whether to sell.

Can you negotiate a better rate without switching banks?

Yes, and it is usually the first step. Bring a written offer from another institution, your up-to-date payment history and, if your balance has dropped a lot, how much you owe compared with the value of the house. Many banks prefer to lower the rate or change the terms rather than lose a good customer. An internal renegotiation can save you the appraisal, the deed and the registration of a new mortgage, although it is worth confirming whether the bank charges a fee for amending the contract.

Does an extra payment change the loan's insurance?

Generally, yes. Life or credit balance insurance is usually calculated on what you still owe, so it drops when the balance drops; fire insurance, by contrast, is calculated on the value of the building and does not change with an extra payment. Ask the bank to show you the full installment, insurance included, after each extra payment, and check that the recalculation appears on the next statement.

What happens to the mortgage if you sell the house before paying it off?

The balance is paid off with the sale proceeds. Before signing a purchase option agreement, ask for the balance statement and whether the bank charges an early payoff fee, because that amount comes out of what you receive. How the payment and the registration of the release and of the sale are carried out should be confirmed with a lawyer or a notary.

This guide summarizes the usual practice of banks, mutuales and cooperatives in Costa Rica for prepaying, refinancing, transferring and restructuring mortgage loans, as of November 2026. Terms vary between institutions and between contracts, so read yours and get everything in writing. It does not replace the advice of a lawyer, a notary or an independent financial adviser.