Increasing mortgage repayments

K

kcat

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Hi,

We have 360k borrowed over 35 years with IIB. We only intend to live in our current home for maybe 5years. Ideally we would like to keep it then but realistically we think we will have to sell it to buy another one. We recently started putting €200 extra into the mortgage. We recieved a letter back from IBI saying:

1. that this would lower the future repayments.
2. OR if we were going to pay this €200 extra for good, we could change the term of the mortage.

Given that we will only be there for 5years what is the best thing to do?

thanks,
 
Option 2 should yield the better savings - and you may also be able to get cheaper mortgage protection life assurance for the shorter term.

Karl Jeacle's mortgage calculator is useful for modelling the effects on total interest costs of different accelerated repayment scenarios.
 
Formally reducing the term will mean you will have to keep payng the extra 200 each month. It might not be something you want to be stuck with - maybe the option to not overpay sometimes would be useful?
When they say "lower future repayments" - you should still be able to overpay - they probably just mean that the set repayment amount will be lower because of the overpayments you made.
It might be worth checking with them frst how they treat these overpayments - are they crediting your account straight away or do they not adjust it till the end of the year?
If they are not adjusting till the year end it may be a better option for you to pay the money into one of the new regular saver accounts and then pay the large lump sum off the mortgage at the end of the year. Make sure they use it to reduce the capital amount .
 
Yes - make sure if you are making additional regular or lump sum repayments that they are reducing the capital outstanding immediately or ASAP!
 
Hi,
We would like to redeem our home loan and have been advised by the bnk in question that we should pay off majoirty but keep up some repayments and keep account active should we need to borrow in future. Would this be more advantageous?. Our loan is small and we are in a position to repay it now.
 
Don't expect independent, professional advice from a tied agent. You need to weigh up the costs/benefits of doing this - e.g.

Possible costs
  • Interest/repayments on any nominal outstanding amount
  • Ongoing mortgage protection life assurance premiums if applicable
  • If your existing lender is not the most competitive then you should be switching anyway or looking to do an equity release at some point in the fugure elsewhere.
Possible benefits
  • If the costs above are less than the costs of doing an equity release from scratch and you plan to do this in the short term then it could well be a good idea.
  • As long as the property is mortgage you don't have to worry about storing your mortgage deeds (possibly at a cost elsewhere) since the lender hangs onto them
There may be other possible costs/benefits.
 
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