# Ulster Bank: 6 month break in mortgage?



## ButtermilkJa (6 May 2008)

The below was mentioned on another thread...


Angrygirl said:


> I'm with the Ulster Bank for my mortgage and their policy is you can only take one payment break for the life of your mortgage, the max is six months and you have to put the request in writing to them explaining why you want/need the break...
> 
> Good Luck


Has anybody any experience of what would UB would regard as an acceptable reason? I have been paying my mortgage for over 3 years without any problem. I have a car loan of €7k which I would like to pay off asap as I could really do with freeing up the €360 p/month it's currently costing me. Taking a 6 month break would enable me to clear the loan in full.

Would this be an acceptable reason to take a break in the mortgage? If so, would it be a good/bad idea to do this (in terms of how much it would cost me in the long run. Still 30-odd years left on mortgage!)?


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## Satanta (6 May 2008)

ButtermilkJa said:


> Would this be an acceptable reason to take a break in the mortgage? If so, would it be a good/bad idea to do this (in terms of how much it would cost me in the long run. Still 30-odd years left on mortgage!)?


Technically, it is a good idea... but with a significant caveat.

The car loan will have a significantly higher rate than the mortgage. So clearing the loan at a higher rate is a good idea.

However, if you leave the excess on the mortgage (e.g. the extra six months interest) over the entire life of the mortgage (the 30 odd years) you'll end up paying a significantly higher amount of interest in the long run.

If you clear the car loan and then adjust your mortgage payments (e.g. put the money you would/have been putting against the car loan against the mortgage) you should end up with a net benefit from the move in the long run.


Not sure what UB would consider a "valid reason". I'd assume that "balancing of outgoings for a short period" would fall under what's acceptable, but have no experience of it.


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## Angrygirl (6 May 2008)

ulster bank just got back to me today and said as i am on a fixed rate i can't take a payment break 
They said when i asked about it that they just add the 6 months onto the end of the mortgage - easy as that she said 

Good luck


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## Caveat (6 May 2008)

Satanta said:


> However, if you leave the excess on the mortgage (e.g. the extra six months interest) over the entire life of the mortgage (the 30 odd years) you'll end up paying a significantly higher amount of interest in the long run.


 
I'm not sure I fully understand this - is a 6 month break really going to accrue significant additional interest? Maybe I've misunderstood how they calculate/apply this - how does it work (generally speaking) and can you give an example of the degree to which the borrower might be 'penalised'?

_Crossed with Angrygirl - question maybe partially answered!_


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## Satanta (6 May 2008)

Angrygirl said:


> They said when i asked about it that they just add the 6 months onto the end of the mortgage - easy as that she said


They she mention that they also increase the loan amount by the extra six months interest?

I'm not familiar with the exact rules of UB, but I would suggest that this is the case.


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## Angrygirl (6 May 2008)

Satanta said:


> They she mention that they also increase the loan amount by the extra six months interest?


No nothing like that was mentioned at all.. she just said the six months that i would not be paying would be added on at the end, i asked was that it no other costs and thats when she said yes its as easy as that....

If thats the case i'm glad they didn't give it to me now


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## ButtermilkJa (6 May 2008)

Thanks for all that.

If it's true that they just add the 6 months on at the end of the term is that not _better_ than capitalising the 6 months of interest and adding that on?

I know you're adding to your original term but what's 6 months in 30 years? In my case anyway I would consider it better to extend the mortgage by 6 months and free up much needed cash flow than to pay off €7k at 9.5% over the next 3 or 4 years?


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## Satanta (6 May 2008)

Angrygirl said:


> No nothing like that was mentioned at all.. she just said the six months that i would not be paying would be added on at the end, i asked was that it no other costs and thats when she said yes its as easy as that....
> 
> If thats the case i'm glad they didn't give it to me now


I've very much open to correction. This might not be the case, judging from the response you got it appears not to be... although I'd like to see this in writing if I were to be going down that route.



Caveat said:


> I'm not sure I fully understand this - is a 6 month break really going to accrue significant additional interest? Maybe I've misunderstood how they calculate/apply this - how does it work (generally speaking) and can you give an example of the degree to which the borrower might be 'penalised'?
> 
> _Crossed with Angrygirl - question maybe partially answered!_


Sorry, missed this post as I was making a previous reply.

If, and that's a big if judging by the info Angrygirl got, the intrest is additional....

Taking a guess at the monthly intrest being ~€600p/m (30 years remaining on mortgage so I'm guessing the intrest element is fairly high)....
6 months intrest is approx €3600.

Using http://www.jeacle.ie/mortgage/ with a conservative intrest rate of 4% (in reality I'd suggest this will be higher over the 30 year term) it suggests a total payment of €6,186.24, so an additional €2,586.24 in interest (71% of the amount again in interest given the long term). 

Weigh this up against the "saving" from paying off the car loan early and it might be a negative net result (if the mortgage payments aren't increased).

Whether the total amounts are "significant" is a matter of opinion, but I'd certainly prefer to keep every possible cent in my pocket and out of the banks! 



ButtermilkJa said:


> If it's true that they just add the 6 months on at the end of the term is that not _better_ than capitalising the 6 months of interest and adding that on?


Yes, it certainly is a better deal. You're getting 6 months interest free so a brilliant deal (e.g. even just letting inflation take a bite out of it will be helping). It is worth looking at the other additional costs (re life insurance etc.), but probably fairly negligable in the grand scheme of things.


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## ButtermilkJa (6 May 2008)

Satanta said:


> ...
> Whether the total amounts are "significant" is a matter of opinion, but I'd certainly prefer to keep every possible cent in my pocket and out of the banks!


I agree, I would certainly not like to pay the additional 6 months interest (i.e. the car loan) off over a 30 year period (the interest at the moment is closer to ~€900p/m).

I think I'd only take option 2 if it was available... i.e. the 6 months extended on the term.


Satanta said:


> Yes, it certainly is a better deal. You're getting 6 months interest free so a brilliant deal (e.g. even just letting inflation take a bite out of it will be helping). It is worth looking at the other additional costs (re life insurance etc.), but probably fairly negligable in the grand scheme of things.


Do you reckon I would even need to get that changed at all? At the moment I'm paying ~€19 p/m for mortgage protection and that's all.


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## Satanta (6 May 2008)

ButtermilkJa said:


> Do you reckon I would even need to get that changed at all? At the moment I'm paying ~€19 p/m for mortgage protection and that's all.


No idea on that one.

I'd certainly check with your provider to check what additional costs are/might be involved. It might be as simple as six extra payments on the current policy, but I've no idea.


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