overpaying mortgage

Thanks wbbs,

I guess the answer on whether I can do this is "it depends" on the bank. So I am wondering what are the list of questions I can ask the bank. Here's my starting list (if anyone can add a question I would be most appreciated).
- If I lodge a lump sum into the mortgage account can I request that this does not come off the capital?
- Is the interest on the loan calculated using the end of day balance on the mortgage account and would the lump sum in the account effectively reduce the end of day balance?
- Can the lump sum be withdrawn at a later point?
- Any others?

If the answers are "yes" then regardless of whether the bank likes it or not then it works.
Thx

bovis said:

- Can the lump sum be withdrawn at a later point?

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This is your main question.

If you overpay by lump sum, they will probably reduce your capital but you could setup an overpayment so you are still paying the same every month and paying off more of the capital. So this would have the effect you are after if the answer to the above question is yes

That is the only question really and I would want the answer if yes in writing.

I can't imagine there is any variation that would not save you interest so the only important thing is that it is not treated as a lump sum payment off the mortgage but as a credit or a prepayment. Which bank?

wbbs said:

That is the only question really and I would want the answer if yes in writing.

I can't imagine there is any variation that would not save you interest so the only important thing is that it is not treated as a lump sum payment off the mortgage but as a credit or a prepayment. Which bank?

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AIB.

So the question I need to ask is:
I want to make an overpayment that is not taken off the loan capital, keep the payments the same and have a written confirmation that I can access this overpayment at a later time - is this possible?

I don't think any of the banks would let you operate your account this way - the amount would either be lodged to the account and paid off the mortgage (never to be accessed again) or it would just sit there doing nothing. A lodgement to a mortgage is usually (always?) a one-way thing - you can put in whatever you want but you can't get it back. You would need a proper offset mortgage account to do what you are proposing -I know NIB still offer these and there may be others. It would be great if the banks let you do this but I could see how it would turn into an administrative nightmare for them if everyone starting lodging and withdrawing small amounts.

bovis said:

If the answers are "yes" then regardless of whether the bank likes it or not then it works.

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If the bank doesn't like it then given that they decide the answers, the answers will be no...

They certainly used to in some cases, very few people actually did this so it wasn't a huge issue. The money is just lodged and does indeed just sit there, but while sitting there you are being charged interest on the net balance so it saves you interest. Now if you are on a low tracker then you may be able to get a higher rate of interest elsewhere but if not then it can be of benefit. The actual offset mortgages actually worked slightly differently in that the money offset was held in a totally separate account to the mortgage account.