KBC allows mortgage holders to redraw overpayments - is this still available?

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gnf_ireland

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I submitted a request to KBC to overpay my mortgage by a predefined amount each month last week. I got a letter this morning confirming the request, which had a very interesting paragraph on it :-

"The extra amount is deducted from your capital balance and will result in an interest saving for you. Please note: the term of your mortgage will not be reduced with this method of overpayment.

If you wish to redraw these funds at any time please send us a written instruction signed by all parties to the mortgage. Please be advised, if you redraw funds from your mortgage account you capital balance will increase thus increasing your scheduled monthly repayment"

I was surprised at this. When I overpaid with Bank of Ireland, I don't remember having the flexibility to redraw the funds down again. There was definitely nothing in the letter I got from them confirming the overpayment. Is this redraw option 'standard', and has anyone any experience using it ?

It would seem like it is similar in nature (although not the same obviously) to the offset mortgages of boom time era. Given the really low interest rates for deposits and the high DIRT tax associated with it, is this a better option for savers?

It would depend on how easy it would be to withdraw the funds, which I will enquire about, but it did get me thinking this morning

Any experience others have with the redraw option would be most appreciated.

It may just be another valid reason to switch to KBC !!
 
Very unusual!! I have never seen this option given before. You are correct, it is an extraordinary generous offer for savers as potentially you can input additional cash during the year to your mortgage and draw it out again to go on your holidays! From a banking perspective it does appear to be very unusual and there must be some restrictions on the ability to lodge/withdraw funds!
 
Yep. I'm with KBC and use my mortgage as a savings account. The good side of KBCs high interest for existing customers is that any money I throw into the mortgage saves me 4.3% and there's no DIRT as I'm not saving money in a bank. I'm paying off a loan.

My mortgage comes out on the 1st of every month. I have to send the cheque about the 10th for it to impact on the next months payment. If I sent it after 20th, the cheque definitely arrives next day (as it goes from my account) but it doesn't make a difference to the next payment on the 1st. It has to wait until the next payment.

It's very easy to pay into the mortgage. I just write a cheque and a letter and send it in. You have to keep an eye on this as sometimes KBC have put this into a savings account for me (which I didn't ask for). But that's sorted very easily with a phone call.

To take the money out you just write a letter, signed by the names from the mortgage and nominate how much to take out and which account to put it into. I've done this twice, the first time I did it took about 3 weeks. The second time took about a week from the time I posted the letter.
 
Thanks all for the commentary on this. I have paid some lump sums payments in, but have not received the letters yet confirming the details. Will be interesting to see if the option also exists on the lump sum !

It does make an interesting means of holding 'rainy day funds' so to speak!
 
Hi,

I too have availed of this facility with kbc insofar as i have overpaid my mortgage and instructed kbc to reduce the capital with the overpayment. I also confirmed with kbc that i could re draw down any overpayment although have not yet done this.

I think it a brilliant option to have though and an effective way to save your extra euros.
 
44brendan said:
You are correct, it is an extraordinary generous offer for savers
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I think it's a great facility and I have no idea why all banks are not doing it automatically.

I have argued that someone who has overpaid their mortgage, should not be considered to be in arrears if the balance outstanding today is lower than it would have been at the beginning of the mortgage.

I would not classify it as generous. KBC are relending money at a mortgage rate which is fleecing their customers.

I wonder does it apply to people who have overpaid their trackers. Again, I have suggested to lenders that they could encourage overpayment of trackers by allowing borrowers to withdraw the overpayment at any time.

Brendan
 
Brendan Burgess said:
I would not classify it as generous. KBC are relending money at a mortgage rate which is fleecing their customers.
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It's generous to a certain extent. Customers with significant savings but no ability to use them to pay down the money that you've lent to them represent a much lower risk, in general, to customers that you are likely to re-lend that money to if you allow the customer to use it as a mortgage over-payment.
 
I agree with @ronaldo here. If a customer has overpaid by say 25% of the mortgage over a number of months, they are obviously a lower risk as their LTV is lower. However certain customers do not want to do this as they want to maintain a level of 'rainy day funds' for a variety of reasons. If you have access to these funds now via a redraw option, this is a reasonable saving for the customer - given current mortgage, deposit and DIRT rates.

I would also agree with @Brendan Burgess that it would make logical sense that a customer is not in arrears until the amount outstanding is more than what the standard mortgage amortisation amount should be based on the interest rate and mortgage duration agreed.


I also agree that in a 'fair world', it would not be classified as overly generous, as they are effectively only giving you your money back that you overpaid, but we can all agree Irish banking and mortgages in particular could hardly be classified as 'fair' at the moment.

For me, it is much better to be not paying 3.55% on "rainy day funds" than getting ~1.5% on a notice account and paying DIRT and PRSI on the interest earned. I will take this as a 'nice surprise' and it would encourage me to continue to overpay the mortgage
 
Its a great facility. Though the use of it requires strong discipline as there can be a temptation to withdraw repeatedly which partly defeats the purpose of seeking to overpay a little. Good for lump sums and 'rainy day'.

Frankly I don't see it as generous in the slightest. People should be entitled to repay their loans whenever they want without any obstacles from Banks. This is only possible if the loans are variable rate. Bit much for Banks to charge 3-5% on mortgages and then only offer half a per cent if even that much on deposits.
 
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gnf_ireland said:
"The extra amount is deducted from your capital balance and will result in an interest saving for you. Please note: the term of your mortgage will not be reduced with this method of overpayment.

If you wish to redraw these funds at any time please send us a written instruction signed by all parties to the mortgage. Please be advised, if you redraw funds from your mortgage account you capital balance will increase thus increasing your scheduled monthly repayment"
Click to expand...

Is this facility still available with KBC, does anyone do it regularly?
 
Yep. It's part of the terms of the mortgage. I used it pretty frequently last year. I used it as a savings policy. Anything I put onto the mortgage is saving me 4.1% off the interest. If you put the same money into the bank you get shag all and then get charged DIRT. This is just a plain 4.1% saving for me.
It's pretty straightforward to take the money back. Just send them a letter saying you want to transfer X to your bank account. Normally it takes them about a week.
 
This is a huge thing that I was unaware of. So basically, if I owe KBC €500k and I have €100k sitting on deposit earning nothing, I can pay the €100k in, leaving €400k outstanding, but with scope to access the €100k virtually on demand?

This is like the offset mortgages of years gone by.
 
Gordon Gekko said:
This is like the offset mortgages of years gone by.
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@Gordon Gekko Yes, this is the way I understand it. I have never attempted to redraw the money, but might do it some day soon just to see how it works. But ultimately, this is what my original letter states, as I quoted in the original post. I have been assured by the bank and by others this is how it works !
 
This really is a significant feature of the KBC offering that I wasn't aware of. I wonder why KBC don't make a bigger deal of this?
 
Sarenco said:
This really is a significant feature of the KBC offering that I wasn't aware of. I wonder why KBC don't make a bigger deal of this?
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@Sarenco We can agree on something :) But yes, I was surprised as well, hence the original thread. I am surprised this is not very high on their advertising, as it is a major attraction to people who also have savings and want to keep the cash buffer !
 
Gordon Gekko said:
This is a huge thing that I was unaware of. So basically, if I owe KBC €500k and I have €100k sitting on deposit earning nothing, I can pay the €100k in, leaving €400k outstanding, but with scope to access the €100k virtually on demand?
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Yep it's exactly that. I've withdrawn amounts of up to €10K and they never gave any hassle. All they needed was a letter signed by me and my wife with an instruction to transfer back to our account. The max it ever took was two weeks with one week being more standard.

It's the only benefit of being an existing customer with KBC. I'm saving 4.09% on any money I put in. Which is great.
I'm also paying 4.09% on my mortgage which is not so great.
 
permanent tsb allows borrowers who have overpaid to take a payment holiday,but they can't get a refund, like they can with KBC.

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To just clear something up. So I'm 100% clear on this.

Lets say I have 150k in cash. Looking at a house for say 220k. I'm conscious that I don't want to lock away the full 150k in an illiquid asset like a home maybe I'd like to invest it in the future, buy car, help relatives with extensions, deposits for them to buy house, renovations. Any big ticket item.

Therefore I sign a 30yr mortgage with a 10% deposit (22k down) with KBC. Leaving me 128k in cash but 198k mortgage. From what your saying I can then turn around and place the 128k in cash against the mortgage - the mortgage account showing a balance of 70k? Correct?

Q - does this shorten the term of the mortgage or reduce the monthly mortgage payment to KBC?
Q - does the LTV interest also fall in line with the overpayment. Going from their 80% LTV rate to their <50%?

Cheers
 
letitroll said:
Q - does the LTV interest also fall in line with the overpayment. Going from their 80% LTV rate to their <50%?
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No, and this is the biggest weakness of your plan. So only borrow enough to get you into the lowest LTV.

After that, your plan works fine.

Brendan
 
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