# Overpay on tracker mortgage



## Mel

I'm coming off my fixed rate onto a tracker mortgage next month. 
I'd like to use this to reduce the term of the mortgage - I currently owe €223K over 32 years. 

What is the best way to do this? 
I pay by DD each month; how can I arrange an additional overpayment, or is it better to save a lump sum and lodge this later in the year if/ when rates start to rise again? 
Also, I know it's advised to repay on the capital not the interest - how do I do this?


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## NorfBank

Write to lender outlining how much you would like to pay extra each month and ask for the extra payment to be paid off the capital.

This should be done automatically but apparently some lenders keep the overpayment in a separate account unless instructed to pay it off the capital immediately.

If your savings rate is higher than your mortgage rate then the lump sum method will save you more money if you are disciplined and make sure you actually pay the lump sum off the mortgage and don't spend it all on a holiday/sports car/shoes.

www.moneybackmortgages.ie


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## glynner

We overpaid on our tracker since the interest rates dropped and had accumulated nearly €5000 but upon reflection that overpayment sits without earning interest until you instruct the bank to take it off your loan or term, so we decided to open a 21 day higher interest account and i transfer the overpayment amount to that account so  that it can  earn a few extra bob and once a year we will transfer that amount off our mortgage. Its also gives us the flexability if we needed funds as a result of unemployment etc we can get access to them, where as if they are sitting in your mortgage account you can not get them transferred to any other account.


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## Ash 22

Paying extra on your mortgage each month must you actually pay it over the counter or can any direct debit be set up for that. If paying over the counter can it be lodged by anybody else or does it have to be the mortgage holder only.


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## VOR

[broken link removed]

Have a look at the above to see how much you can save by overpaying.

Must banks will let you set your DD at a higher amount each month to clear the mortagge faster. As mentioned elsewhere, be careful that your overpayment is not sitting in credit. You will want this applied to the capital.

Anybody should be able to lodge to the account just as long as they know the bank account details.

Oh, one thing I forgot to mention - Consider carefully if the money could be better used in a pension or saving for a rainy day. There are very few banks that will let you take back out what you have put in.


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## Ash 22

Thanks VOR. Yes it would save a considerable amount by overpaying.


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## RMCF

Ash 22 said:


> Paying extra on your mortgage each month must you actually pay it over the counter or can any direct debit be set up for that. If paying over the counter can it be lodged by anybody else or does it have to be the mortgage holder only.



Something to bear in mind, I recently asked the AIB about paying off a lump sum on my tracker and the assistant said that the amount/interest/remaining sum etc has to be calculated manually each time a payment is made off the capital, so they would prefer it if I saved it all up into a decent amount before doing it, rather than coming in with small amounts like €100 or so every couple weeks.


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## Ash 22

Thanks for that RMCF. I'll enquire more into that.


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## Petal

This thread has been very useful! I came off a fixed rate not so long ago and decided to keep paying the same amount, which results in an overpayment of 400 Euro. The other day I noticed that in the mortgage account something called prepayment has gone up, so like Norfbank said, it appears they keep it separate, so first thing Monday morning I will instruct them to take if off the capital immediately!


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## VOR

RMCF said:


> Something to bear in mind, I recently asked the AIB about paying off a lump sum on my tracker and the assistant said that the amount/interest/remaining sum etc has to be calculated manually each time a payment is made off the capital, so they would prefer it if I saved it all up into a decent amount before doing it, rather than coming in with small amounts like €100 or so every couple weeks.


 
I am with AIB also. I tried to transfer a few hundred euro to my mortgage online. It wouldn't take. I rang 24HR banking and they wouldn't let me lodge to the mortgage account.

So then I decided to log in to my BOI account. And I could transfer from there. Madness!!!  

Now I just pay it monthly as part of my DD.


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## RMCF

VOR said:


> I am with AIB also. I tried to transfer a few hundred euro to my mortgage online. It wouldn't take. I rang 24HR banking and they wouldn't let me lodge to the mortgage account.
> 
> So then I decided to log in to my BOI account. And I could transfer from there. Madness!!!
> 
> Now I just pay it monthly as part of my DD.



But are you definitely sure that the money you are paying into your mortgage account is actually coming off the capital amount? I ask because I have heard about money being held in limbo until you actually instruct your lender in writing that you want the payments to come off the capital.

Worth checking with them.


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## micheller

I've also been able to transfer BOI to AIB Mortgage a/c. Rang and checked multiple times- after numerous and different wrong information was eventually assured that this was definately automatically coming off the capital.


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## twofor1

If you have on line banking can you not see that any extra payment has come off the capital ?

  If my NIB mortgage A/c is €100K today and I lodge €1K to it, the balance immediately drops to €99K, the next day I can see the interest due will have increased by €4.07 (€99K x 1.5%/365)


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## jambo.ie

Ash 22 said:


> Thanks VOR. Yes it would save a considerable amount by overpaying.


What's the current spread between deposit rates and tracker rates?

It may make more sense to pay the extra into a high yield deposit account while getting tax relief on your mortgage interest. As mentioned above though this would require a lot of discipline to ringfence the savings for mortgage capital and not spend on holidays etc.


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## stevieob

Mel said:


> I'm coming off my fixed rate onto a tracker mortgage next month.
> I'd like to use this to reduce the term of the mortgage - I currently owe €223K over 32 years.


 

I think trackers are a thing of the past so be interested to know where you got this information from?


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## Mel

stevieob said:


> I think trackers are a thing of the past so be interested to know where you got this information from?


 
From the lender... It was part of the original mortgage contract that once the fixed term expired I would move onto a tracker - at that time rates were rising.  It's been reconfirmed in writing.


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## VOR

RMCF said:


> But are you definitely sure that the money you are paying into your mortgage account is actually coming off the capital amount?


 
Positive. I have a letter from them saying that my mortgage has reduced by X years.


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