Overpayment / re-fix flexibility of AIB's green 5yr fixed rate (and some other rates)

RedOnion said:
Could you share the wording?
And is this a former Ulster Bank mortgage, or originated with AIB?

The 'loophole' is contractual, so AIB cannot remove it.
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Original Fixed Rate Rate mortgage with AIB, half way through fixed term

We are writing to let you know about our new AIB Fixed Rate Mortgage Overpayment feature that will soon be available to you.
From 14 October 2023, all fixed rate mortgage customers can make payments, over the normal regular scheduled payments, up to €5,000 each calendar year for the term of the fixed rate. And we won't charge an early repayment charge (ERC) for the overpayment. If you make an overpayment in December, this needs to be paid no later than 15 December to make sure that it's processed within the current year's overpayment allowance. While we will try to process all overpayments by the end of the current year, if you make an overpayment after this date, it may be taken from the following year's allowance. Any additional overpayments above €5,000, or early full redemption of your mortgage, may result in an early repayment charge.
Advantages - An overpayment will reduce the cost of credit of your loan. Your scheduled mortgage repayments will reduce in line with the reduced balance on the account, while the remaining term and prevailing rate of interest remain unchanged.
The following example illustrates the effect of making an overpayment up to the limit, without an early repayment charge. At the time of the overpayment the mortgage balance is €200,000 on a fixed interest rate of 5.25% for a period of 5 years (60 months) and there are 25 years remaining in the term of the mortgage.
a) No overpayment - total cost of credit is €158,952.80, repayments of €1,196.52 per month
b) €5,000 overpayment is made - total cost of credit is €154,978.09, repayments of €1,166.61 per month
In the calculation above we're assuming the interest rate applied for the full mortgage term is 5.25%.
Disadvantages - There are no disadvantages of making an overpayment up to the value specified.
We recommend that you get independent financial advice before considering an overpayment on your fixed rate.
If you would like more information on the AIB Fixed Rate Overpayments allowance before you make an overpayment, please contact us on 0818 251 008 or visit aib.ie/our-products/mortgages/flexible-payment-options.
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I got it as well.. but surely they can’t override my mortgage agreement/contract?
 
So how I read this is the scenario yesterday was you could overpay on green mortgages if your met the formula earlier on. Now it is the case that the have added this as an additional term to encourage people to overpay but they set a limit of 5k just in case it goes the other way and bites them. So it's just a way to encourage others to overpay tbh and probably find this thread. So if the interest rates go the other way they will still allow 5k. So they put it as the smallest amount as possible as they want to get people thinking about it as it benefits them without exposing them to more risk but only that 5k per year.
 
Red Onion has summarised the situation for AIB fixed rate mortgage holders here:

Key Post - AIB fixed rate customers face no early break fee currently

Analysis as at 12th September 2023. This refers to AIB mortgages only, and not their subsidiaries EBS & Haven. All lenders calculate break fees by comparing comparing the funding rate when you took out the mortgage with the funding rate when break out of the fixed rate. So when interest rates...
www.askaboutmoney.com
 
Hi all,

I've read this thread and the other related threads and I'm super confused as I'm not very knowledgeable about these financial terms so I'd appreciate some guidance.

I'm 2 years in 12 years mortgage with AIB (5 years fixed, green mortgage, 2.15% interest rate).

If I understand correctly, I can now overpay lumpsum 5K without early repayment fee (new AIB mortgage feature). And I can even overpay more than that because my interest rate is lower than the current rates. Is this correct?

If so, is there not an upper limit? I may as well just overpay the whole of remaining credit if I have the money. Would that not cause breakage fee?

If all of the above is fine, then, do I just transfer on the app/Internet banking? I added my mortgage account but I'm scared making 5K or more overpayment would reduce term and break my fixed term rate.

I'd appreciate any guidance. Thanks
 
oralet said:
Hi all,

I've read this thread and the other related threads and I'm super confused as I'm not very knowledgeable about these financial terms so I'd appreciate some guidance.

I'm 2 years in 12 years mortgage with AIB (5 years fixed, green mortgage, 2.15% interest rate).

If I understand correctly, I can now overpay lumpsum 5K without early repayment fee (new AIB mortgage feature). And I can even overpay more than that because my interest rate is lower than the current rates. Is this correct?

If so, is there not an upper limit? I may as well just overpay the whole of remaining credit if I have the money. Would that not cause breakage fee?

If all of the above is fine, then, do I just transfer on the app/Internet banking? I added my mortgage account but I'm scared making 5K or more overpayment would reduce term and break my fixed term rate.

I'd appreciate any guidance. Thanks
Click to expand...
My guess is you’d just reduce the monthly repayment amount and everything else would remain as is.
 
oralet said:
I'm scared making 5K or more overpayment would reduce term and break my fixed term rate.

I'd appreciate any guidance. Thanks
Click to expand...

They can't cancel your fixed rate unless you agree to it. If you don't believe me see what AIB say themselves. The link below outlines your options. You have a choice how any overpayment is treated. If you look to reduce the term then it would appear you may have to forfeit your current fixed rate. However, if you're happy to just reduce your monthly repayments your fixed rate is safe.

aib.ie

Can I make an Overpayment on Mortgage repayments?

aib.ie aib.ie

oralet said:
I'm 2 years in 12 years mortgage with AIB (5 years fixed, green mortgage, 2.15% interest rate).
Click to expand...
This is a very good rate, so good in fact it is likely to be more advantageous to save any overpayment than to overpay.

You have 3 years left and the current best buy on a 3 year fixed term deposit rate sheet dirt comfortably exceeds your mortgage rate.

Best Buy - Term Deposits (Fixed Lump Sum Savings)

Rates are frequently updated. Information last changed: 28 October 2024. Highest Term Deposit Rates 3 Months - FCM Bank - 3.51% 6 Months - CA Autobank via Raisin Bank - 3.35% 1 Year - CA Autobank via Raisin Bank and Reitumu Banka via Raisin Bank - 3.30% 2 Years - CA Autobank via Raisin Bank...
www.askaboutmoney.com

Savings rather than overpaying isn't for everyone but some of the arguments for and against are in the following:

Better to save than to overpay a low fixed rate mortgage in some instances?

A recent post got me thinking are we close to the point where it makes financial sense to save rather than to pay down debt i.e., for some borrowers the return on savings (net of DIRT & PRSI) is greater than overpaying a fixed rate mortgage. There was a point in the past where this strategy...
www.askaboutmoney.com
 
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