PTSB Permanent TSB - Overpayments: Leave as credit or take off principal

We've been overpaying our mortgage for the last 3 years now and have amassed a sizeable credit on our mortgage account. Is there any benefit to taking this amount off the capital / principle amount?

As far as I know, the credit amount is taken into account when the interest is being calculated e.g. owe 100K, have credit of 10K, interest is calculated on 90K.

We could take the 10K off the 100K formally and therefore adjust our repayment amount each month or have the term of the mortgage reduced but I like the idea of having this "credit" amount, as long as the end interest is the same. If we wanted to pause the mortgage payments for 6 months, I'm sure we could do this easily.

Once the credit amount roughly matches the capital amount due, then we should just be able to close out the mortgage.

Am I being naive here or is it as simple as I've stated? Could we be loosing out by not lowering the principle amount due?

Any mortgage experts out there who would like a stab at this? ;-)

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

Hi there,
I have exactly the same question, and Im with PTSB, had a mortgage review and they told me the same thing. Am I missing out too?

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

Not an expert , but i do know that been in credit will significantly reduce the number of years due on your mortgage. In my case , i used the surplus to pay mortgage for 18 months and cancelled my D/Debit accordingly.This freed up an extra 500 euro a month which i then used to good effect on other o/s loans

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

Mothy said:

We've been overpaying our mortgage for the last 3 years now and have amassed a sizeable credit on our mortgage account. Is there any benefit to taking this amount off the capital / principle amount?

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Yes - of course. Having it sitting in the account as a credit is doing you no good. Paying it off the capital will save you money in the long run - especially if you also keep to the normal schedule repayments thereafter thus reducing the effective term (and cost) of the mortgage. See Karl Jeacle's mortgage calculator. Obviously the money will then be "locked away" and not easily accessible (e.g. only via an equity release/mortgage topup).

As far as I know, the credit amount is taken into account when the interest is being calculated e.g. owe 100K, have credit of 10K, interest is calculated on 90K.

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This is only the case with current account/offset mortgages. If you are not on one of those then the money in the account is not saving you anything.

We could take the 10K off the 100K formally and therefore adjust our repayment amount each month or have the term of the mortgage reduced but I like the idea of having this "credit" amount, as long as the end interest is the same. If we wanted to pause the mortgage payments for 6 months, I'm sure we could do this easily.

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If that suits you better then so be it but it's not the most cost effective way. In fact making the capital repayment now and then asking for a repayment holiday might even be a better idea. But you'd need to crunch the numbers to check.

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

Thank you very much for the info. The guy reasured me yesterday that when repayments are calculated the credit in the mortgage account is taking into consideration . Now Im really confused.

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

Oxford said:

Thank you very much for the info. The guy reasured me yesterday that when repayments are calculated the credit in the mortgage account is taking into consideration . Now Im really confused.

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Read the terms & conditions of your mortgage loan agreement. If it is not a current account/offset mortgage then I would be very surprised if balances in the account were offset against capital when charging interest. Get your man to put his comments in writing and see what happens. If you want the money handy/accessible or want to use it for paying the mortgage at some point in the future then consider leaving it as is. If you want to reduce the effective term and total cost of your mortgage (possibly significantly) then consider paying if off the capital.

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

Clubman: Thank you for all your replies. I very much agree. Taking what your told over the phone as gospel truth can be dangerous. I'll have to sit down with my statements this evening to see if I can calculate what exactly is happening. A letter to the mortgage lender might be a good idea.

A useful calculator is here (but our statement looks far more random then this one, due to difference between payment and interest dates)
http://www.decisionaide.com/mpcalculators/ExtraPaymentsCalculator/ExtraPayments1.asp

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

I find Karl Jeacle's mortgage calculator linked to earlier pretty good.

As ever with accelerated capital repayments, borrowers should always agree in writing with their lender what they want to happen to avoid any nasty surprises.

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

Thank you very much Club Man I sent a letter to PTSB and ill see what happens next.

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

No problem iIf you agree it in writing with your lender ,then you can let it stay in the account as a credit while being taken into account for interest calculation. This is handy if you don't have mortgage protection insurance. The amount in credit can also pay the mortgage if you lost your job.

Just make sure it's agreed in writing. I had the unfortunate experience of having credit in my mortgae account without it doing anything. I hadn't formerly agreed it with the bank ( PTSB)

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

Niallers said:

No problem iIf you agree it in writing with your lender ,then you can let it stay in the account as a credit while being taken into account for interest calculation.

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You mean a "roll your own" current account mortgage? Are you SURE that many lenders offer this? I doubt it to be honest.

This is handy if you don't have mortgage protection insurance.

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You mean mortgage repayment insurance rather than mortgage protection life assurance? It's not different to saving the money elsewhere.

Re: Permanent TSB - Overpayments: Leave as credit or take off pincipal

PTSB offer this. roll your own current account mortage if you agree it with them.

thanks for the correction-Mortgage repayment insurance. It is different from saving the money elsewhere becuase the money in credit goes toward interest calculation potentially knocking years off your mortgage.

We're in a similar position with First Active and have been told that the credit we have paid is taken into account when the interest is being calculated.

I'm worried now having read this!

I've a hypothetical question: if your mortgage provider was to go bust and you had a mortgage of say, E200k and an overpayment credit of E20k would the liquidator say that you owe the bank E180k or would he say you owe E200k and treat the E20k as a deposit which has to join the queue of creditors hoping to get some of their money back?

Mothy and Oxford

This is a very interesting facility. Someone else told me about this recently and I did not believe them.

Is this down in writing anywhere?

If so, it is a big selling point for permanent tsb mortgages.

There is no advantage in paying off the principal, if they are calculating the interest on the net amount. My friend lodged a lump sum last year but now is facing a reduction in income. He has been told that the lump sum will account for his repayments for the next 6 years and he does not have to pay anything.

Permanent tsb should be marketing this.

Brendan

Mothy said:

We've been overpaying our mortgage for the last 3 years now and have amassed a sizeable credit on our mortgage account. Is there any benefit to taking this amount off the capital / principle amount?

As far as I know, the credit amount is taken into account when the interest is being calculated e.g. owe 100K, have credit of 10K, interest is calculated on 90K.

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Can I clarify HOW you are overpaying your mortgage - I have a PTSB mortgage paid by direct debit. How do you overpay it - by lodging money manually to the account?

I looked at my mortgage account online and it shows the very large debit - my outstanding mortgage, and about €500 "prepayment" - no idea where it came from, must have been lying there from the start. I assume this is where the overpayment figures others are referring to is specified. But how do you KNOW that you are paying interest on the net amount as the service doesn't provide a breakdown of interest/capital? Do you just take PTSB's word for it? (short of trying to work it out yourself by looking at the balance outstanding each month..

We set up a standing order to hit the mortgage account weekly - our local PTSB, where we got the loan arranged this for us. Once the standing order was set up, we cancelled the monthly direct debit. We can also amend the SO on Open 24 if necessary. When I queried how it worked, I got an email back from the lady I was dealing with in PTSB explaining that the interest was calculated based on the net amount owed (taking any overpayments into consideration). It's probably best to query in writing how it's dealt with so that you also have their response in writing.

I have a prepayment balance on my Mortgage A/C with PTSB, and asked what it was on Open 24. They told me it was TRS.
Arrears / Prepayment€325.92 Prepaid)... Then I asked another time why it was there? They didn't know... .

podgerodge said:

Can I clarify HOW you are overpaying your mortgage - I have a PTSB mortgage paid by direct debit. How do you overpay it - by lodging money manually to the account?

I looked at my mortgage account online and it shows the very large debit - my outstanding mortgage, and about €500 "prepayment" - no idea where it came from, must have been lying there from the start. I assume this is where the overpayment figures others are referring to is specified. But how do you KNOW that you are paying interest on the net amount as the service doesn't provide a breakdown of interest/capital? Do you just take PTSB's word for it? (short of trying to work it out yourself by looking at the balance outstanding each month..

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[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]we have been overpaying by 50 euro a month since we started our mortgage and are now using that to fund underpayment for unpaid maternity leave. we intend on paying the same amount we are used to paying once we start paying again despite interest rate reductions so will be overpaying by maybe 150-200 and may use it for future underpayments. Ptsb have a n overpayment calculator [broken link removed][/FONT]

taken from ptsb flexible repayment option brochure

B. Overpayment options
1. Lump Sum Payments
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](i) Lump Sum Payments of any amount (where payment is made by cheque, the cleared funds) will be[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](a) credited to the mortgage account thus reducing the loan balance outstanding and allowing the funding of future Underpayments or Payment Holidays with Overpayments or[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](b) in the case of Annuity Mortgages applied, at the option of the Applicant, to reduce the loan term or [/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](c) applied, at the option of the Applicant, to reduce the Applicant’s monthly repayments and to continue to repay the loan over the remaining term.[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](ii) Interest may be adjusted, in the case of monthly rest accounts on the first day of the month following receipt of payment of the Lump Sum and in the case of daily rest accounts, on receipt of payment of the Lump Sum.[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](iii) Where the lump sum payment is made in respect of a fixed rate mortgage prior to the expiry of a fixed interest rate period, the applicant shall pay an additional sum calculated in accordance with the conditions relating to fixed rate loans as provided in General Mortgage Loan Approval Conditions applicable to the Applicant’s mortgage. (Please see important information on "Fixed Rate Loans" at the end of the terms and conditions). [/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](iv) In order to reduce the term of the mortgage or, the monthly repayment, from a lump sum payment, the applicant must complete the appropriate section in the attached application form.[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](v) In the case of Annual Interest Mortgages, Lump Sum Payments will only be included for interest calculation purposes from the 31st December of the year of payment and thereafter.[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](vi) No interest benefit will accrue for Lump Sum Payments on former Irish Permanent Endowment mortgages or [/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]permanent tsb [/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]Interest Only or pension backed mortgages unless the credit is transferred off the capital.[/FONT]
2. Regular Overpayments
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](i) Regular Overpayments may be made monthly or in respect of any other period as agreed with [/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]permanent tsb [/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]and of any amount.[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](ii) The amount of an Overpayment may be added to the Scheduled Monthly or Other Periodic Payment and the total increased repayment will be deducted by direct debit. If no direct debit is in place the repayment arrangements for the Overpayment must be made by the Applicant in a manner [/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]24 [/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]satisfactory to [/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]permanent tsb[/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ].[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](iii) All Overpayments will be credited to the mortgage account and interest will be adjusted accordingly.[/FONT]
[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ](iv) Regular overpayments cannot be made in respect of Annual Interest mortgages, former Irish Permanent Endowment mortgages, [/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]permanent tsb [/FONT][FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]Interest Only or pension backed mortgages.[/FONT]

[FONT=Akzidenz Grotesk BQ,Akzidenz Grotesk BQ]
[broken link removed][/FONT]

I think that brochure is worthy of its own link sandrat. It's very good.

[broken link removed]

I guess this is the key difference between this option and a Mortgage/Current A/c product:

PTSB Terms&Conditions said:

D. No refunds of Overpayments or Lump Sum Payments
No refunds of Overpayments or Lump Sum Payments will be made to the Applicant when payment thereof is received by permanent tsb.

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Given that in most cases, the interest available on regular savings is higher than the rate charged on mortgages, PTSB customers should consider diverting their mortgage payments into a savings account instead.

Brendan