Case Study: Internal Mortgage Switch UB

_ripped_off said:
just need to convince himself that would be a good use of savings!
Click to expand...
Start by saying you want to move back to AIB!

Break fee will stay zero for you unless interbank rates drop a bit.

I'd be happy to have a look at numbers / savings for you if you drop me a PM.
 
Ha I’d be divorced if I even mention AIB.

I can’t seem to open a PM and didn’t want to be posting on an old on. I’ll throw the figures here might be of use to someone else.

Current Mortgage: 347k fixed at 2.6% until 30/9/23
Value of house: 425k so LTV is 81.2%
Need to pay 7K in principal to get to 80% LTV.
7k is in savings but not earning anywhere near 2.2%
 
@_ripped_off
7k off balance.
You'll save 5,780 interest in the next 45 months. Equates to 22% return per annum on your 7k, after tax.
Even if you borrow the 7k on your credit card you'll break even.
 
Just for the sake of completeness we got the breakage fee quote in the post today one day after it expires
Despite reds convincing returns calculated himself reminded me that our kitchen is on borrowed time and do we really want to be borrowing at 6 or 7% to redo that.
So for now I’ll have to hope that house prices remain stable and we will be into 80% LTV by this time next year, interbank rates don’t fall and this product or better is still available!
 
Hi all,

Can I please ask anyone here who knows to clarify about the break funding fee (BFF) for a bank.
Amount of mortgage balance fixed = 173,000
Date fixed = 18th Jan 2019
Period of time fixed = 5years
Fixed rate = 2.6%

I requested a BFF on Oct 9th 2019 and while I received a quote over the phone, at the time I requested a breakdown of the figure which I have only received the today (18th Feb).
Can I please get clarification from the formula that’s used, where T = period of time in months (see picture attached) - yet they use days on the calculation instead of months? Is this a typo?.....I have waited since October for this breakdown and I was informed in December that they introduced a new system and I was the first time that a BFF was requested and that it could not Be sent out until the wording/format etc of their correspondence is signed off on! If this is a typo it’s a big mistake, if not a typo I’m being over charged by my calculations.[broken link removed]

I have been quoted a fee of €3,556 to breakout, but that is using T = period of time in days and not period of time in months. If I use T = period of time in months my own calculations are coming in at €116. Can anyone please advise.

The values for W = .16%
The value form M = -.35%

Thanks
CB
 

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Interesting - there's a wording error in their documentation. It's an error, but you're absolutely correct in what you say.
 
Hi @RedOnion, could I trouble you to do your magic on the below? Requested the info from UB yesterday and would be happy to compare what they say to your estimate...
Amount of mortgage balance outstanding: 333312
Date you fixed: 25-07-2019
Period for which you fixed: 4 years
Fixed rate: 2.6
End date of fixed: 30-09-2023

If the rate at fixing minus the rate now (both minus figures) is a negative figure itself, does that imply the break fee is zero?
 
nephster said:
If the rate at fixing minus the rate now (both minus figures) is a negative figure itself, does that imply the break fee is zero?
Click to expand...
Hi, yes exactly. Your break fee should be zero.

There's a bit of jitters in the market at the moment, and a flight to low risk assets has pushed rates down in the last week, but they are still a few basis points higher than when you fixed.
 
RedOnion said:
Hi, yes exactly. Your break fee should be zero.

There's a bit of jitters in the market at the moment, and a flight to low risk assets has pushed rates down in the last week, but they are still a few basis points higher than when you fixed.
Click to expand...
Fabulous, looking forward to the letter from the bank now which is a bit of a novelty. Thanks a mill!

EDIT: So exactly as predicted by @RedOnion, break fee is zero. Haven't received that letter yet, but they were able to tell me this over the phone as the letter had been generated, and they accepted that I want to break. As others have said this figure is only valid for a very short amount of time (sounds like 10 days from when it is generated).
Now waiting for the rates letter to arrive so I can sign and return it within that period! They won't email it, annoyingly.
 
Last edited:
I am trying to do my own calculations, based on the great work done earlier by others.

Amount of mortgage balance outstanding: €150k, December 2020
Lender: UB
Date you fixed: 10-Dec-2018
Period for which you fixed: 4 years
Fixed rate: 2.60%
Fixed until 31.03.2023

Note that the fixed period is actually more like 4y 4m. So I am roughly half way through the fixed rate period.

I am using the formula:

B = (W - M) x T / 12 x A, where:

B = The Break Funding Fee
W = The Wholesale Rate Prevailing at the date of the existing fixed rate applying to the loan was set
M = The Wholesale Rate prevailing at the switching/redemption date for the unexpired time period of the Fixed Rate Period
T = Period of Time in months to the end of the Fixed Rate Period
A = Principal amount which is subject to the existing fixed rate and which is being switched or redeemed


In my case, using the ICE rate EUR 1100, I get:

10.12.2018 4yr = W = 0.121
23.12.2020 date the closest to now, 2yr is M = -0.519, negative rate

B = (0.121 - (-0.519)) *27/12*150,000 = (0.64)(27/12)(150000) = 216,000


?????
 
I think the problem is with decimals / percentages?

B = (W - M) x T / 12 x A, where:

B = The Break Funding Fee
W = The Wholesale Rate Prevailing at the date of the existing fixed rate applying to the loan was set
M = The Wholesale Rate prevailing at the switching/redemption date for the unexpired time period of the Fixed Rate Period
T = Period of Time in months to the end of the Fixed Rate Period
A = Principal amount which is subject to the existing fixed rate and which is being switched or redeemed


In my case, using the ICE rate EUR 1100, I get:

10.12.2018 4yr = W = 0.121, in calculator use 0.00121?
23.12.2020 date the closest to now, 2yr is M = -0.519, negative rate, in calculator use 0.00519?

B = (0.00121 - (-0.00519)) = 0.0064, or 0.64%, that does seem correct

A penalty/cost of just above half of one percent

(0.0064)(27/12)(150000) = 2,160 looks like a better answer?
 
OK, it looks like a 2,160 breakage fee.

I might save 0.4% over two years, from 2.6% now to 2.2% with UB.

Do I apply that 0.4% saving to the original balance, or the current 150k balance?

0.4% of 150k is 600pa saving, so 1,200 saving over two years.

Not worth it................
 
OK, thanks.

I am doing a 10% overpayment to UB today, rang them, I mentioned the 2.2% 2yr rate, they are sending me out two letters:

rates sheet
breakage fee
 
Letters rec'd from UB today, date on first letter is 06.01.2021.

Break fee = 1,944.28, valid until 14.01.2021.

Second letter, 07.01.2021, sets out the rate sheet.

2yr fixed 2.2% until 31.03.2023 is 39 less pm for same term, so a saving of 26 months * 39 = 1,014

RedOnion, thank you for your help.
 
Out of interest, does the letter just show a break fee figure or does it show the calculation?
 
However, in the second letter, which is about the alternative rate options, there are 12 footnotes.

One of these is about break fees.

It has a formula, and definitions/terms.
 
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