# Best way to overpay mortgage (Ulster Bank)



## Zulu2002 (19 Jul 2012)

Hi all,
looking for some help. I'm being moved to a tracker next month which will free up a significant amount of cash. Sadly I've bucketloads of negative equity on a 2bed I purchased prior to getting married. We're looking to position ourselves to be able to buy a family home in the future (decade?).

Are we better to save a cash lump sum or overpay the current mortgage?

I "heard" that by repaying the mortgage bi-monthly is better that doubling the monthly repayment, could that be right? 

(Mortgage was for 380K in 2006 over 40 years. About 360K left on it now. Moving to ECB +1.25)

Thanks.


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## Eithneangela (19 Jul 2012)

UB will  not allow you to pay your mortgage twice monthly - we've already tried to do that. Their systems (joke!) are not set up to handle fortnightly mortgage payments!


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## wbbs (19 Jul 2012)

Paying bi-monthly could not be better than doubling monthly repayments, at best it gives you one extra payment per year and slightly reduced interest every month as paying on reduced balance every two weeks.   While UB systems cannot take an extra payment mid month by direct debit some of their mortgages can be paid by standing order, this would give you control over the amount and frequency of payments as opposed to direct debit.


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## Setanta12 (19 Jul 2012)

Can I ask a question;

Would UB not insist on the method of payment of the mortgage every month (i.e. they would opt for Direct Debit), so the option of Standing Order is off-the-table, or is it possible to do both with UB mortgages ?

*Think I might be missing something basic here*


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## wbbs (19 Jul 2012)

Doesn't work with all mortgage types, some are set up differently.   But yes UB's preferred method of payment would be direct debit however there is nothing to stop you cancelling the direct debit and setting up standing orders if your product type can accept payments that way, as I said not all can.   Direct debits are regularly cancelled where customers are paying reduced payments etc or paying manually over the counter for whatever reason.   The banks prefer direct debit as obviously they are debiting you rather than you have the control of a standing order, direct debit also allows the payments to vary without difficulty such as interest rate or trs changes, standing orders do not have that flexibility and the customer has to make any changes needed to them.


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## Zulu2002 (20 Jul 2012)

@cashier: dumb luck really. It transpires I took out a tracker mortgage, and then fixed that for 5 year. Sadly I fixed for 5.75%, but thankfully my 5 year term is up and I revert to ecb+1.25%.

@ Kildavin: Speaking to UB, I'm ok to set up a standing order if I'd like.

@wbbs: thanks a million for that. So you reckon I would be better to increase my repayments to €2K monthly (current repayment is €1K monthly) as opposed to increasing the frequency of €1K from monthly to fortnightly?


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## wbbs (20 Jul 2012)

Am I understanding you correctly, you want to pay 2k per month once a month or 1k per month split into two payments?   2k pm will save you more than 1k split any way, however if 2k is what you want to pay every month  then as UB calculate interest daily it will save you more to make that twice a month if that is the way it suits you.   Again it depends on what you want, if you have 2k on the 1st of each month and lodge it to the mortgage that will save you more than lodging 1k on the 1st and 1k on the 15th for example just as say lodging the full 2k on the 30th of that month will save you less.

However, depending on your tracker rate, you may be better off depositing that extra monthly money in a savings account from an interest point of view.


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## Zulu2002 (20 Jul 2012)

Sorry let me clarify. My current repayments are for €1200 per month. I'm thinking of doubling this so I have an additional €1200 to add to my current repayments.

So should I repay 2400 at the start of each month (overpaying by 1200) or should I increase the frequency paying 1200 at the start (as normal) & an additional 1200 two weeks later! 

Sorry for confusion & thanks for patience.


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## Brendan Burgess (20 Jul 2012)

Hi Zulu

I really don't think you should overpay a cheap tracker at all.

Check out this post "Should I use a lump sum to reduce my mortgage?"

Is this your home? 

UB may allow you to transfer your cheap tracker to another house. If you pay off your cheap tracker now, you may end up borrowing at their Standard Variable Rate 4.5% when you move. 

Save your money somewhere else.  

At some stage in the future UB may do a deal to terminate their cheap trackers. If you have a lump of cash, you would be in pole position to take advantage of it.


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## wbbs (20 Jul 2012)

As Brendan says it may be more beneficial not to overpay the tracker but if you still want to then it is more benefit to pay the lot as early in the month as you can as interest is calculated on daily basis so no extra benefit to delaying half the payment until mid month.


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## Zulu2002 (24 Jul 2012)

yeah, i get that by having a regular saver I can get upto 4% (with AIB) interest, and the mortgage I'm paying back is 2%, so I'd be 2% better off saving - however, if I overpay it appears that I would be cutting the term of the mortgage by 13 years. The idea of being unburdened from this disastrous mortgage asap appeals to me.

I guess it's hard for me to realise how much I'd be loosing out on by saving (+2% - dirt = X). I need to go off and calculate...


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## wbbs (24 Jul 2012)

By saving the monthly money as you suggested in one of the regular savings accounts you would have more earned in interest at the end of a year than you would have saved in mortgage interest.  If you keep that going then in theory you should reach an amount in the savings account sufficient to clear your mortgage in less time than increasing your repayments would do.  That is assuming rates stay the same etc and you would have to do the calculations to find the exact savings.

However I did something similar with my mortgage, mind you I wasn't increasing my payments to 2k a month!, I did have a lump sum and could have got a higher investment rate for a number of years and then paid the lump sum plus interest off the mortgage but I decided it was just too much messing.  I preferred to see the mortgage lower immediately and at the time there was a lot of speculation about the safety in general of banks, government guarantee or not, so I went for the peace of mind route and reduced the mortgage.


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## shigllgetcha (8 Aug 2012)

Zulu2002 said:


> yeah, i get that by having a regular saver I can get upto 4% (with AIB) interest, and the mortgage I'm paying back is 2%, so I'd be 2% better off saving - however, if I overpay it appears that I would be cutting the term of the mortgage by 13 years. The idea of being unburdened from this disastrous mortgage asap appeals to me.
> 
> I guess it's hard for me to realise how much I'd be loosing out on by saving (+2% - dirt = X). I need to go off and calculate...


 

Do UB take lump sum overpayments? I think BOI and AIB do, you could save and overpay once a year, best of both worlds benefit from the difference in the interest rates and have the flexibility to have money on hand if you need it.

Or in your example save the money and just pay your mortgage off 13 years early, maybe even quicker with the interest difference


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## aido71 (8 Aug 2012)

I would agree with the opinions expressed here to maintain your current repayments and save the excess at a higher rate of interest. In our case we overpaid since the start ( not tracker ) which left us now in a position of potentially clearing mortgage in 3/4 years ( have posted about this). However due to tax increases salary cuts etc we decided to revert to original and save balance. We are now saving 1k a month which to me is good to build up some savings if we need to access cash. I would look at your personal circumstances and decide if you would be better with savings that you can readily access. Remember once your mortgage payment is gone you can't get that money back. I am happy and at any stage can simply pay a lump sum off mortgage if I want but great comfort knowing a few quid in the bank if we need it. Only caution is you need to be disciplined.... Very tempting to spend the money on things like holidays..... Especially this summer!!! Then again why not! Life is short and as I was advised do what's best for you and yours!


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## Brendan Burgess (8 Aug 2012)

shigllgetcha said:


> Do UB take lump sum overpayments?



They don't have a choice. Under the Consumer Credit Act,  borrowers can make payments off a variable rate mortgage without penalty.


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## justasking2 (8 Aug 2012)

I dont know about the tracker implications, but you can make manual payments to your mortgage account at an Ulster Bank Branch. The cashiers have Bank Giro Credit Transfer slip which go the the mortage account, you only need to apply your Mortgage account number ! So you could let your DDR go as normal and then make the manual payments as well.


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