# Interest Only mortgage with AIB increases by €280 in 24 hours!?!



## kormak (3 Oct 2012)

Sorry for the shock headline and it's not meant to mislead but in the past 24hours I've been severely rattled by my AIB mortgage and am still shaking my head in disbelief.
Yesterday, I noticed the Interest Only mortgage we've literally started paying 2 months ago shot up by €140.
I thought and contacted the bank. They informed me that it was due to the Sept 3rd increase of .50% to VAR mortgage holders. A little taken aback by the scale of the figure I asked her to recalculate and she says everything is in order!!
Now this morning after both myself and wife spend the night thinking where we gonna generate the money from, I wake up to news that they're going for another .50% increase... this will mean a €280 p/m increase for us!!

So,  our mortgage is for 360k and was taken out over 35 yr period.
We started the Interest Only payments this July.
Before we started we were paying €1,444 p/m @ 3.25% fixed.
Once the IO kicked in, it reduced to €935.16 @ 3.25 fixed%
The €863.07 pm @ 3.0% STDVAR
Before jumping up to €1,008.52 this month on account of the rate increase.

I appreciate that we're still paying the interest and therefore we're gonna see fluctuations such as this, but I asked the mortgage dept to calculate what we will be paying once we go back to full mortgage and she says €1,464 pm
a whole €20 more than what were on!!

What I can't get my head around is various websites stating (guestimating) that a .50% increase on a mortgage worth 1k would amount to €15 per month hike. With this in mind, would our mortgae not rise accordingly, i.e. €50/60?!
or does it depend on the length of the mortgage?!

Can anyone shed any light on this for me... I feel like I've been given a PillarBank punch in the face in the past 24 hours and am wondering how on earth has this Interest Only deal jumped up to €280 extra per month?!!
No point in going on the scheme @ this rate....


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## elcato (3 Oct 2012)

> Once the IO kicked in, it reduced to €935.16 @ 3.5%
> The €863.07 pm @ 3.0% STDVAR
> Before jumping up to €1,008.52 this month on account of the rate increase.


935.16 to 1008.52 is a rise of around €73. Where is the 280 figure coming from ? Are you saying that the next rise is going to be around 400 for a .5% to bring it up to 1400 ? Are there arrears on the account which may have to be included in the new figure ?

note: please refrain from swearing as per the posting guidelines.


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## wbbs (3 Oct 2012)

What is the balance owing?  Presume it is not an even 360k now.

If it was then an increase of .5% on 360 would mean extra €150 p.m.


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## shigllgetcha (3 Oct 2012)

kormak said:


> Once the IO kicked in, it reduced to €935.16 @ 3.5%


 
Its simpler because you arent repaying capital
the quote suggests your current ballance is 320k

0.5% increase on 320k is €133 per month

which means 0.5 + the new 0.5 will mean €266 extra a month over all since you went IO or another increase of €133 to come


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## kormak (3 Oct 2012)

elcato said:


> 935.16 to 1008.52 is a rise of around €73. Where is the 280 figure coming from ? Are you saying that the next rise is going to be around 400 for a .5% to bring it up to 1400 ? Are there arrears on the account which may have to be included in the new figure ?
> 
> note: please refrain from swearing as per the posting guidelines.



sorry, correction when we were fixed it was @ 3.25% not 3.5%
I'm assuming this is where the miscalculation is.
There are no arrears on this account.
+ apologies for swearing! 



wbbs said:


> What is the balance owing?  Presume it is not an even 360k now.
> 
> If it was then an increase of .5% on 360 would mean extra €150 p.m.



I don't actually no the exact balance remaining but I can find out...
we started drawing down this mortgage on Sept. 2009 which might give some idea how much has been paid.

how exactly did you work out €150pm from 360?



shigllgetcha said:


> Its simpler because you arent repaying capital
> the quote suggests your current ballance is 320k
> 
> 0.5% increase on 320k is €133 per month
> ...



sorry, figures is not really my strong point!! 
But yeah this is close to the €140 they quoted and of course the next €140odd euro will arrive in December 1st, just in time for Christmas!!! 
(man I'm finding it difficult not to swear whilst writing this...)


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## wbbs (3 Oct 2012)

360 x .5% , divide by 12 for monthly amount = 150


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## millieforbes (4 Oct 2012)

Do you have a copy of the loan agreement you signed? It should have a section detailing repayments that lists the impact a 1% increase in interest rates would have on your repayments


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## mark12 (4 Oct 2012)

And if you read the fine print in your mortgage contract you will find a clause stating that in October 2012, you will have to contribute a small amount towards the 1 Billion paid yesterday to the unsecured bondholders in AIB.. Seriously, the timing for this latest rate increase couldn't have been worse.


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## Bronte (4 Oct 2012)

What has changed so dramatically in 3 years that you have had to go on interest only? Did one of you lose a job? 

If you're struggling on this repayment increase now then you seriously need to budget and check your spending. If you want advise on that you'll have to fill out the money makeover thread.

_____________________________

Nothing against you but again a very large 35 year mortgage with no room for maneovre. This is a warning to others, currently trying to get mortgages, get shorter term mortgages, 20 to 25 years max,  when a crisis hits at least it gives you the option of stretching it out for a couple of years, thereby reducing repayments, but still paying back the capital, but if you're at 35 years that's nearly impossible.


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## kormak (4 Oct 2012)

wbbs said:


> 360 x .5% , divide by 12 for monthly amount = 150



thanks for explaining that to me...



Bronte said:


> What has changed so dramatically in 3 years that you have had to go on interest only? Did one of you lose a job?



I think that's kind of a personal question to be prodding on a forum and is irrelevant to the topic.
On hindsight, a lesser term on the mortgage would have been favourable but at the time it was offered by the bank and thus the monthly payments were lowered.


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