# Pay off Tracker early AIB



## jimmyd

I have 97K left on a 120K mortgage with AIB tracker (24 years left @ 1.350%), the monthly paypment is €430 and I get 30€ monthly _mortgage interest relief.
I work but my partner does not, We have about 270K savings in BOI and we are both 35 years of age.
Today I rang AIB to offer 70K to pay off the mortgage and was told that AIB do no deals on tracker mortgages at all - has anyone done a deal with them on tracker?
If I was to pay off the tracker now and get no deal would they take 97K or would they want interest on it?
_


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## dec1892

I'd be interested in doing some sort of similar deal with AIB as well, i wrote them a letter making them an offer of paying off a chunk of my mortgage if they could offer me a discount. That was 2 years ago, and I never got any reply from them!


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## boardnashea

I was thinking of approaching AIB as well to make a similar enquiry. I would love to hear if anyone has had any success.


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## fandango1

Why should the banks do a deal in such situations? The OP has a debt of 97K and is well positioned to pay it in full. 

I don't think the banks should even give a second thought to such 'offers'. 

Pay up and do everyone a favour. The way the banks have been bailed out the only way we'll all get back to a better footing is when the banks are sorted and are run properly.


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## SwordsMan

no way the bank should give you money off, you have 270k in savings and debt of 97k, you can well aford to pay.

However if you did pay off whole lot now , you will SAVE on interest paid over the lietime of the loan, although there is probably a case that you could earn as much interest in a decent savings a/c


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## 44brendan

> Why should the banks do a deal in such situations? The OP has a debt of 97K and is well positioned to pay it in full.


I think that there is a misunderstanding of the OP's request. What is being proposed may make economic sense to the Bank. I.e. they are currently financiang a mortgage of 97K and receiveng a return of 1.35%. Bank's actual cost of funds would be well above this level. Assuming a marginal cost of funds of 3%, the difference in rates constitutes an annual loss to the bank. Taking the 24 year remaining term and a consistent differential rate of 1.65% the bank would lose a total of 19,200 over the period (assuming an average balance of 48,500 outstanding for the period. Even taking the time value of money into consideration, it would probably pay the bank to seriously consider an offer >70K for a full redemption of the mortgage now. 
Having said that, I have no knowledge of any Bank other than BoSI prepared to look at these deals. This is probably due to the fact that the balance of 27K (or whatever was negotiated) would have to be recognised as a bad debt in the current year. This would distort short term profitability, albeit at the benefit of a longer term gain. Such is the way that large corporate decisions are made


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## Seagull

If you pay off the loan in full, they will only be looking for the remaining capital.



SwordsMan said:


> However if you did pay off whole lot now , you will SAVE on interest paid over the lietime of the loan, although there is probably a case that you could earn as much interest in a decent savings a/c


 
It's a cheap tracker mortgage at 1.35%. Right now, you can earn a significantly higher rate of interest than that. Paying it off early would actually be costing the OP.


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## PadKiss

This is an issue that the banks have not addressed yet and all lenders are losing money on trackers but my suggestion and for your info i would invest 240k (max that can be invested into An Post Savings Bond) of your savings into An Post and earn 7% tax free after 3 years (16800) and at this stage there may well be some movement on the tracker issue that may be to your advantage.


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## davep

I was interested in this thread. I am too in the very lucky position to be able to pay off my tracker. Recently I have been informed that it is reducing to 1.1%. As it is costing them money lending to me. I proposed that we come to a settlement. I have 8 years left and proposed paying 70% of remainder to them. With 70% of my mortgage then free to be invested by the bank over the next 8 years they would more than triple their profits. They get rid of a tracker. I have no monthly payments, no losers, everyone wins............but........Bank refused. They stumbled through all sorts of explanations. The logic of it was lost on me! One proposal was that I could apply to them by filling in multiple forms for a restructuring of loan????? The logic again lost on me. 
So, I have taken the cash out of the bank and put it on deposit in the Post office with dirt paid. 
A poster on this site said to me that cash at the moment is king. So my advice is not to bother with the morons in the banks and put you cash in places like the 3 4 or 5 year Post office schemes. I would be concerned that you have so much cash in  the bank. Make sure your interest is not at the dreadfully low bank rates.


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## Brendan Burgess

A couple of potential downsides to that strategy. 

1) If the state defaults on its savings in An Post, you will lose your savings, but your mortgage will remain.  This is a low risk, but not a risk to be ignored completely. 

2) Make sure you can access your money without a penalty as the banks might bring in a scheme for trackers.


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## Gerard123

Forget the attempt at a write off if you pay early. Ridiculous for anyone to think that someone in a position to comfortably pay their mortgage would or should get a reduction. The taxpayer in effect picks the cost up.  This whole argument about cost of funds is also flawed. Wrong to believe that this problem will last 24 years.  Banks can also borrow cheap money from ECB at I believe 1% with conditions. Also while we would all love ECB rate to stay as low as it is it won't last for 24 years.  

Now to the more serious issue of what I think you should or could do. I would lodge an amount equal to your mortgage with AIB as a deposit, probably a 3 to 5 year terms to get the best rate. That protects you if there was a serious problem with the banks or Govt backed savings, i.e. at least your mortgage would be paid with the deposits being offset. Do check that there is a right of set off of the deposit against the mortgage. Some downsides but on balance that is what I would do.  Continue paying mortgage at low tracker rate and you can always access the deposit account in the future. Do ensure you keep enough on short term cash somewhere in case you need it.  


The remaining savings could be put somewhere to get decent interest, but watch out for the limit on the deposit guarantee scheme. With both you and partner being 35 now is also good time to ensure your pensions are well set up and you can afford to do this so perhaps some cash could go there. 


My advice, talk to a number of pension advisers and see what they say. Then consider going with one to help further.


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## Brendan Burgess

> Ridiculous for anyone to think that someone in a position to comfortably  pay their mortgage would or should get a reduction. The taxpayer in  effect picks the cost up.


There is no cost to the taxpayer if AIB gave a 10% discount for the repayment of a long-term mortgage at ECB + 0.5%.   

The cost of funding is not particularly relevant either. 

The reality is that AIB could get a far higher return by lending 90% of the money to someone at the SVR. 

The banks are unlikely to give discounts for a few reasons;


Our stupid accountancy rules means that they show trackers in their books at their nominal value. If they give a commercially sensible discount for the early repayment, they would have to make an accounting write-off
Some borrowers will repay their cheap trackers early anyway. AIB are worried, that if they give a discount, only those who were planning to repay early would take advantage of the discount.


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## serotoninsid

Gerard123 said:


> Now to the more serious issue of what I think you should or could do. I would lodge an amount equal to your mortgage with AIB as a deposit, probably a 3 to 5 year terms to get the best rate. That protects you if there was a serious problem with the banks or Govt backed savings, i.e. at least your mortgage would be paid with the deposits being offset.



Is there aam consensus that this would be effective in the event of a bail-in?


Gerard123 said:


> Do check that there is a right of set off of the deposit against the mortgage.


Where to check?  Would this be a general bank policy - or likely to be mentioned in the mortgage agreement?


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## Brendan Burgess

serotoninsid said:


> Is there aam consensus that this would be effective in the event of a bail-in?
> 
> Where to check?  Would this be a general bank policy - or likely to be mentioned in the mortgage agreement?



This has been discussed before and, no one has been able to give a definitive answer to that question. 

As far as I am concerned, if AIB goes bust, I still owe my mortgage and I could lose my deposit. 

If you have an off-set account (As far as I know, only Danske Bank and First Active offered these) I presume you would have a right of set-off. 

Come to think of it, the lenders should convert their mortgages into set-off mortgages. They would attract more deposits.


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## happypat

I have circa eur400k mortgage with 20 years to go on a tracker (0.8% above ecb) with PTSB.  I also have eur200k in cash. They wouldn't do any deal on repayment so I'm taking 2.6% fixed for one year while tracker is 1.3%. 

I was surprised they had zero interest in offering an incentive.  What's changed since they offered 10% to pay off lump sums from PTSB's perspective?


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## dam099

davep said:


> I was interested in this thread. I am too in the very lucky position to be able to pay off my tracker. Recently I have been informed that it is reducing to 1.1%. As it is costing them money lending to me. I proposed that we come to a settlement. I have 8 years left and proposed paying 70% of remainder to them.


The point is moot as banks appear not to be doing these deals but 30% discount with only 8 years left wouldnt sound like its in banks interest anyway. Your current difference to SVR is about 3.5% which multiplied by 8 years is just barely 30%. ECB is unusually low right now so your tracker will likely average more than 1.1% over the 8 years. Also as you are presumably paying off capital the difference between SVR and tracker would not be on 100% of your current balance over the remaining term as this reduces every month.


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## Cantalia

Brendan, is An Post's savings not guaranteed by the state up to 100k also???? Has this been removed????


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## in the mire

Can I just ask what happens if I have a 100k mortgage and I am in a position to pay it all off in 1lump. Do I have to pay a charge also for early repayment as the bank looses out on interest. I see alot of posts on other topics and it's "sell the house and pay off mortgage" answers.  What about the contract which stipulates early repayment charges am I missing something.


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## PadKiss

Hi In the mire
If you are repaying a mortgage that is currently on a variable or tracker rate there should be no penalty to repaying the loan early. If you are in a current fixed rate there may be a breakage fee to be paid. If so find out how much and if the amount seems excessive then it may be better to wait thill the fixed term has finished before repaying the loan Hope this helps Padraic


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## in the mire

Ok thanks for clarifying that


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## daithi

*overpaying tracker  mortgage*

Hi I have a tracker with UB which I am currently overpaying by 400e /month-should I just put this 400 /mo on deposit in the post office or should I just keep going with the overpayments as things stand?

cheers,

daithi


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## oldnick

Deposit rates are so  low that once you pay DIRT -and especially if you pay PRSI on the yiled (which you should but I'm not sure how the average PAYE worker will be caught for this)- that the nett difference  financially is so tiny that other factors come into play.

- You may need  to get hold of cash quickly,and if you've lessened your deposit amount you may not grab that deal on whatever interests you.
- On the other hand there is a great mental boost to paying off your mortgage.

Basically these are the types of reason to decide - there's no big money difference in either option.


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## podgerodge

and it struck me recently, now that deposit rates have come down near the tracker rate, that the cost of paying mortgage protection should be factored in - pay off would reduce the annual premium (though you might have to take out a new policy)


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## Yakuza

podgerodge said:


> and it struck me recently, now that deposit rates have come down near the tracker rate, that the cost of paying mortgage protection should be factored in - pay off would reduce the annual premium (though you might have to take out a new policy)


 
I've a mortgage protection plan whose sum assured is greater than the mortgage amount (and the margin will get larger as it's priced on interest rates at 6% and I'm overpaying).  As far as I know, in the event of a claim, the policy will pay out the amount of the sum assured, regardless of the mortgage amount outstanding.  Presumably any excess would go into the estate of the deceased.

With that in mind, it might be more bother than it's worth to cancel and set up a new policy.


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