Confused over overpayment

M

Mousehelp

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hi. I overpaid my mortgage in 2003/4 by €1000 a month for approx 15 months.

I queried that there has been no reduction in principal or term on the load - i.e. I still have the same maturity date and have had the same monthly repayments.

The answer I received from the bank was that 'any savings would be in terms of interest paid on your mortgage'. Is this correct? Surely if I paid less interest, then my balance would be reduced quicker and hence the term shortened? Or am I missing something? thanks in advance.
 
Did you specify whether the over payment should be applied against term or repayment?

Does your mortgage allow you to take out the overpayment, or take payment holidays against the amount? If there's anything like that, it might explain why the end date hasn't changed.
 
thank you. no, i didn't specify where the over payment was to be applied to. i have the statements so need to figure them out. just thought it was an unusual reply from the bank re: savings on the interest.Need a glass of wine and a calculator to go through tonight a i guess.
 
Bank of Ireland - formerly ICS. Yes, payments the same and fluctuated only with interest rate changes( moved to a tracker).
When raised it with the bank, they gave me the reply about the interest payment as outlined above.
 
Hi Mousey

Read this and it will explain all.

Key Post - A guide to mortgage repayment calculations

As always, comments, corrections and suggestions for layout very welcome - Brendan There have been a few questions on askaboutmoney which have been very difficult to answer without explaining the background to mortgage calculations. For example: Bank of Scotland offer to write off my...
www.askaboutmoney.com

And it will show you how to check your statements.

Brendan
 
When you pay down a mortgage in advance of the contractual payments:

1. The balance falls and you are immediately saving on interest in every case.
2, You are NOT better off if they reduce the term and the repayment is harder to pay - they may not re-extend the term
3. Always keep the term as long as possible when you pay lump sums.

W
 
WizardDr said:
When you pay down a mortgage in advance of the contractual payments:

1. The balance falls and you are immediately saving on interest in every case.
2, You are NOT better off if they reduce the term and the repayment is harder to pay - they may not re-extend the term
3. Always keep the term as long as possible when you pay lump sums.

W
Click to expand...
But if I save on interest, surely the principal will go down quicker and hence the term will be shorter?

At the moment (2 years left), I am still paying the same amount monthly and have the same ending date. I cannot See how I have gained at all from the increased payments.,
 
When I wrote to query Impact of over payment, I asked them to send me the statements and if if the over payment would result in reduced term. They sent me back the statements and a letter saying ‘any savings would be on interest Paid’

I’ll call them today to see if I can get a maturation date from them. Thank you.
 
Mousehelp said:
, I asked them to send me the statements and if if the over payment would result in reduced term. They sent me back the statements and a letter saying ‘any savings would be on interest Paid’
Click to expand...

So they did not give you a maturity date?

Brendan
 
Thank you. Maturity date wasn’t mentioned but I called them today and they gave me the original date as my maturity date. I’m waiting in someone to call me back on it.,
 
Mousehelp said:
I called them today and they gave me the original date as my maturity date. I’m waiting in someone to call me back on it.,
Click to expand...

I would not rely on what they tell you over the phone.

The original maturity date is probably on the system, but that is of no relevance.

Send in a formal letter.

Brendan
 
Mousehelp said:
hi. I overpaid my mortgage in 2003/4 by €1000 a month for approx 15 months.

I queried that there has been no reduction in principal or term on the load - i.e. I still have the same maturity date and have had the same monthly repayments.

The answer I received from the bank was that 'any savings would be in terms of interest paid on your mortgage'. Is this correct? Surely if I paid less interest, then my balance would be reduced quicker and hence the term shortened? Or am I missing something? thanks in advance.
Click to expand...

At the end of 2004/2005 was there any adjustment in your repayment? If there was, that is where you overpayment has benefited you, you've had a lower payment to make in the last 15 years than you would have had otherwise. I have been overpaying my UB mortgage for years, once a year the repayment is recalculated on the basis of the remaining amount over the remaining term (I have never asked them to reduce the term), then they reduce my repayment to ensure that I am still hitting the original maturity date. In order to counter that I have had to increase my overpayment each time by the amount of the reduction.
 
My mortgage is on target to be paid off way before the original end date due to overpayments but all documentation I receive shows the original end date because that's what the computer shows, a rough calculation of dividing your outstanding balance by your payments will show you approx how long is left.
 
Thanks Monbretia. I’ve requested an updated statement today so will Sit down with everything then and sort it out.
 
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