gnf_ireland
Registered User
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I have attempted to calculate the benefits of KBC's overpayment facility which allows a customer to claw back these funds at any time. I believe my calculations are correct, but would ask that others do review them to see if I have made any clangers in the calculations.
Obvious health warning is to check the terms of overpayment claw back with KBC directly, just in case the rules change
Please note all figures are completely fictional, although the scenario in general does apply.
Lets say Mr Jones has a 300k mortgage with KBC @ 3.55% over 20 years, with monthly repayments of 1748. Now lets say Mr Jones decides he is willing to pay 2000 euro a month against the mortgage, which would equate to a 252 euro a month overpayment. This would take 3 years 5 months off the term of the mortgage. Mr Jones also has 50,000 in notice deposits @ 1.5%, effectively earning him 37.50 euro a month after DIRT (450 a year)
However, Mr Jones is annoyed that KBC will not offer him the 3.25% rate on offer and is thinking of moving to Ulster Bank instead to avail of the 3.35% rate. This move would reduce his mortgage repayments to 1707, but Mr Jones continues to pay 2000 euro + 37.50 from the interest. This would be an over payment of 330.50. This would save 4 years 3 months off the mortgage term. My calculations also show that after 5 years the mortgage balance is 221,087 and 10 years its 127,815.
Instead of doing this, Mr Jones could overpay the KBC mortgage by the 50k savings, knowing he can claw it back at any stage. At 3.55%, the 250k mortgage would now have repayments of 1457 a month. Assuming he continues to pay 2000 a month against the mortgage, this would equate to 543 overpayment and save 6 years and 11 months off the term of the mortgage. My calculations also show that after 5 years the mortgage balance is 167,430 and 10 years its 68,840.
Taking into account that in the Ulster Bank scenario Mr Jones still has 50k on deposit, the comparison figures at 5 and 10 years would be
Ulster KBC Saving
Year 5 171,087 167,430 3,657
Year 10 77,815 68,840 8,975
Obviously, this calculation only applies to customers who are in a position to overpay their mortgage on a monthly basis (or pay a lump sum against it), while giving them the added security that they can claw back the funds at any stage. This effectively uses your mortgage account as a deposit account.
So in the event the customer is in this position, does it make sense to switch from KBC even though there are better rates available? My calculations show that there are greater savings to be made by utilising the overpayment mechanism - or are my sums completely incorrect?
Calculations made using
Obvious health warning is to check the terms of overpayment claw back with KBC directly, just in case the rules change
Please note all figures are completely fictional, although the scenario in general does apply.
Lets say Mr Jones has a 300k mortgage with KBC @ 3.55% over 20 years, with monthly repayments of 1748. Now lets say Mr Jones decides he is willing to pay 2000 euro a month against the mortgage, which would equate to a 252 euro a month overpayment. This would take 3 years 5 months off the term of the mortgage. Mr Jones also has 50,000 in notice deposits @ 1.5%, effectively earning him 37.50 euro a month after DIRT (450 a year)
However, Mr Jones is annoyed that KBC will not offer him the 3.25% rate on offer and is thinking of moving to Ulster Bank instead to avail of the 3.35% rate. This move would reduce his mortgage repayments to 1707, but Mr Jones continues to pay 2000 euro + 37.50 from the interest. This would be an over payment of 330.50. This would save 4 years 3 months off the mortgage term. My calculations also show that after 5 years the mortgage balance is 221,087 and 10 years its 127,815.
Instead of doing this, Mr Jones could overpay the KBC mortgage by the 50k savings, knowing he can claw it back at any stage. At 3.55%, the 250k mortgage would now have repayments of 1457 a month. Assuming he continues to pay 2000 a month against the mortgage, this would equate to 543 overpayment and save 6 years and 11 months off the term of the mortgage. My calculations also show that after 5 years the mortgage balance is 167,430 and 10 years its 68,840.
Taking into account that in the Ulster Bank scenario Mr Jones still has 50k on deposit, the comparison figures at 5 and 10 years would be
Ulster KBC Saving
Year 5 171,087 167,430 3,657
Year 10 77,815 68,840 8,975
Obviously, this calculation only applies to customers who are in a position to overpay their mortgage on a monthly basis (or pay a lump sum against it), while giving them the added security that they can claw back the funds at any stage. This effectively uses your mortgage account as a deposit account.
So in the event the customer is in this position, does it make sense to switch from KBC even though there are better rates available? My calculations show that there are greater savings to be made by utilising the overpayment mechanism - or are my sums completely incorrect?
Calculations made using