Advantages of paying back more than the regular monthly payment on mortgage....

P

ppbb

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I have a fixed 2.55% 1 yr ( first ) term of a 15 yr mortgage value 140k then it goes to variable or the option to fix again.
Repayments are approx 900 per month can I repay say an extra 300 pm for the first yr presuming I have this money available to do so or do I have to stick to the regulated payments because the interest rate is fixed - are there penalties etc..
Mortgage is with PTSB.
Would there be any penalty in repaying lump sums later on say in yr 2 and subsequent years?
 
As the interest is fixed, you would repay the actual amount i.e E900 without any extra payments.

When you are on a variable rate, you can overpay monthly (or yearly lump sums) but you must tell the lender that the payments are partial redemptions to reduce the 140k faster. Otherwise the extra payments just go into your mortgage a/c as a big credit balance and do nothing to affect your mortgage term or amount.

If you make changes to repayments on a fixed rate, there most likely will be a penalty.

Our current mortgage is with ebs, 25yr taken out in 1996.
We have overpayed for about the last 6years, mainly by leaving our repayments unchanged when the rates were falling, as well as adding our own overpayments.
Our mortgage now has about 3 more years to run, instead of 14 !
 
I'm with PTSB as well in the last 3 years in fixed rate 1 year. However before we started payments, I specifically asked If I could do overpayment i.e it should only be EUR1270 but we are paying EUR1500 in the last 3 years.

Everytime I get my renewal notice around Oct, they will default to put me on variable rate. Then I will ring them that I want to remain in fix and still pay EUR1500.

No problem. I got revised/confirmation of my new rate and payments as requested.

I'm planning to go on fix for 2 years this Oct still maintain it at EUR1500.
 
Hi pinoy - Are you sure they are taking this overpayment off your principle as oppose to keeping it in some account for 'rainydays' ? As suggested above you need to 'remind' the bank of this.
 
Elcato is well versed in this, I was stung by our bank when I made a series of one off overpayments. These payments were lodged in a "clearing account" to drawn against instead of the monthly direct debit! I now make any additional payments/ alteration of instructions by letter to head office only, local bank staff don't know/ care about this sort of thing, I reckon there's not too many people (outside of AAM readers of course) who overpay with the intention of clearing their mortgage before the due date.
 
I could see the breakdown of my mortgage account online. And it seems the whole EUR1500 is deducted from interest and capital. I don't think it's being put in another account. And when I inquired about the nos of years/months left, it was shorterned by 5 months i think. But I will call them today again and verify this.
 
I do not understand your statement about big credit balance not affecting the mortgage. Surely it has to reduce the mortgage balance and therefore the monthly interest ???
 
Actually it doesn't get deducted from your mortgage balance (unless requested). The bank will hold it as a kinda deposit so if you default on payment for any reason they will use this money to make the payments without penalty. This is how they sell this crap, as if they were doing you a favour.
 
When I first asked the EBS to start making overpayments, the staff member at the counter asked if I wanted it to reduce the term otherwise, she said, "its not much use to you as it just goes into your (mortgage) a/c and does nothing".

I was clueless about this until she told me.
 
Yes, I've just gone through the process of applying for a mortgage and the person I dealt with was very clear about this, if you want to reduce the term of your mortgage by paying extra you absolutely must put this in writing (even if it's just a two liner) and notify the agency, otherwise it's simply added to your mortgage account and dipped into if you can't make the monthly payment. It will just sit there and not make any impact on the mortgage term unless you say so specifically.
 
Some of the examples mentioned may well be true. However, most mortgage accounts are on 'daily balance' calcultaions and as regards variable payments most certainly reduce the interest due immediately. As regards fixed rates, many systems are not geared towards calculating 'penalties' for each and every out of course payment, whereas a 'redemtion' before fixed term expires would trigger a penalty.

The nature of mortgage systems means there are vast differences bewteen one institution and another.
 
Sorry Dr Wizard, have to contradict you there, most mortgage accounts may be on a "daily balance" format as you say but I know 1 lender who doesn't operate that way, that is ACC Bank! I've previously posted on their behaviour- I got compensation from them because of screw ups in relation to overpayments on my mortgage. Now whenever I make one -off payments (over payments) I always write to head office and request a statement by return.
 
hi guys,
I've just realised that my mortgage lender (IIB) has not been taking my overpayments of my mortgage account and that these overpayments have just been sitting in a side account having no impact whatsoever on my mortgage term - even though I have it in writing (2.5 years ago) that they would do so!
Does anyone know how to calculate how much this has cost me to see if it is worth giving them grief over it?
thanks
Pauline
 
I'd surgest calling to the bank in question with the your copy of your written request and talking to a mortgage adviser.


A good way to estimate how much they have cost you.

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