Overpaying Mortgage & First Active

[sluice44]

My brother was overpaying his mortgage by €100 for about 18 months. Initially he was told verbally that it would take 5 years off his mortgage. He recently got a statement where his overpayments were shown as a credit on the printout.

When he rang to enquire, First Active told him that the overpayments just sit there until the value reaches 5% of the mortgage and only then do they put it against the capital owed.

Does this sound right? If he switched mortgages before 5yrs or stopped the overpayments, the money could just sit there for a long time.

 

[ClubMan]

He should check the terms & conditions of his mortgage agreement - they may stipulate a minimum amount for lump sum capital repayments. As ever, when accelerating repayments in this way it always makes sense to put your intentions (e.g. to chip away at the capital with any additional lump sum or regular mortgage "overpayments" as opposed to keeping them as a credit on the account or whatever) in writing to avoid any confusion and as a paper trail to be consulted in the event of any disagreement. Never simply agree these things verbally even if the lender insists that this is sufficient!

 

[LDFerguson]

It certainly sounds like a fairly common occurrence whereby your brother didn't make his intentions for the €100 clear to First Active, or else he did, and they made a mistake.

 

[sluice44]

Thanks for the replies. I concede he may not have made himself clear with First Active but, for me, I would think it's weird to have, say, €150,000 debit on one side of the balance sheet and, say, €3,000 on the credit side of an account whose balance changes daily (with interest calculations).