Thanks. It's all clear.Net Present value and the magic of compounding - 100 Euro are more worth today than in 6 months - also you get interest for these 6 months.
Similiar when you pay off any debt - if you pay off 100 Eruro today you save more interest than paying it off in 6 months time.
Never understood anyone who decides to make larger lump sum payments than just paying it off regularly. You can also come to this conclusion by just comparing the interest rates between your savings or current account with the interest rate of your mortgage.
On the second question: if I recall you can change your AIB mandatory repayments to bi-weekly.
I'm not aware of such an option with AIB but this would honestly make a miniscule difference to your mortgage. The difference between compounding biweekly and monthly is just not worth the effort, especially if your income is monthly.Is it possible to change monthly repayments to biweekly?
How could you end up paying €2-3k? If you make an overpayment without first confirming the break fee, you will be notified by post anyway so worst case scenario is that you get a €10-20 charge on a €1k overpayment. It's not going to be in the thousands.I know most likely the break fee will be zero, but it's not guaranteed and I may end up paying 2-3k.
I read on this forum that people were paying 2k-3k in break fee. But I suppose that's the penalty on the whole mortgage amount and not for an extra repayment. Am I correct?You seem to be confusing a number of different issues
I'm not aware of such an option with AIB but this would honestly make a miniscule difference to your mortgage. The difference between compounding biweekly and monthly is just not worth the effort, especially if your income is monthly.
If you google it, you will see lots of incorrect info saying that it pays off your mortgage quicker but they generally make the mistake of dividing the monthly payment by 2 and paying that amount biweekly. This is not compounding, it is equivalent to making 13 monthly payments in a calendar year or overpaying by ~8% (13/12)
How could you end up paying €2-3k? If you make an overpayment without first confirming the break fee, you will be notified by post anyway so worst case scenario is that you get a €10-20 charge on a €1k overpayment. It's not going to be in the thousands.
But realistically, it is almost a certainty that no AIB fixed rates for 1-4 years terms will drop back below your current 2.1% so you will not have to worry about a break fee.
Just go ahead and set up a standing order for your monthly overpayments in your online banking and you can forget about it.
Say I have 110K left on mortgage and monthly repayment is 600. If I make an overpayment of 1000, and there is a break fee. What would it be?
You seem to be confusing a number of different issues
I'm not aware of such an option with AIB but this would honestly make a miniscule difference to your mortgage. The difference between compounding biweekly and monthly is just not worth the effort, especially if your income is monthly.
If you google it, you will see lots of incorrect info saying that it pays off your mortgage quicker but they generally make the mistake of dividing the monthly payment by 2 and paying that amount biweekly. This is not compounding, it is equivalent to making 13 monthly payments in a calendar year or overpaying by ~8% (13/12)
Zero. It will be zero for as long as AIBs 1, 2, 3 & 4 year fixed rates stay above your 2.1% rate. It really is that simple for you.Say I have 110K left on mortgage and monthly repayment is 600. If I make an overpayment of 1000, and there is a break fee. What would it be?
If you ask for a break fee, it will be based on the total outstanding mortgage balance but really it is a percentage. Anecdotally, the worst break fees I've seen on AAM were in the 2-3%. But these were a very specific group of people who had fixed for a very long period of time before the rates dropped. You won't fall in this category.I read on this forum that people were paying 2k-3k in break fee. But I suppose that's the penalty on the whole mortgage amount and not for an extra repayment. Am I correct?
Where on the forum did you read that someone who fixed with AIB for three or five years has a break fee since AIB updated their break fee methodology?I read on this forum that people were paying 2k-3k in break fee. But I suppose that's the penalty on the whole mortgage amount and not for an extra repayment. Am I correct?
Say I have 110K left on mortgage and monthly repayment is 600. If I make an overpayment of 1000, and there is a break fee. What would it be?
Thanks for the crisp explanation!Zero. It will be zero for as long as AIBs 1, 2, 3 & 4 year fixed rates stay above your 2.1% rate. It really is that simple for you.
If you ask for a break fee, it will be based on the total outstanding mortgage balance but really it is a percentage. Anecdotally, the worst break fees I've seen on AAM were in the 2-3%. But these were a very specific group of people who had fixed for a very long period of time before the rates dropped. You won't fall in this category.
To put it in perspective, if you start making months overpayments of €1k and you notice a break fee has been applied, I would highly doubt that it would be more than €10 (1%). Even at that, you are still saving the other 1.1% and 2.1% for each year thereafter that you have the mortgage.
In a nutshell, just start overpaying regularly and reassess if/when you get charged the €10. If you have a big one off lumpsum, then confirm it with AIB to be on the safe side
You are a bit late imho for refixing - also no one can say what the rate is in 2024. Personally I would not refix - especially after the hike today. But who knows and the rate might even increase further by 2024. Depends on your risk appetite.Should we ask for a break fee and, if still zero, fix both for 5 years now or wait until 2024?
If we transfer an additional €100-€200 on salary day into our mortgage accounts from time to time, do we have to pay a break fee? We don’t want to increase the amount we pay monthly, we want to have flexibility to transfer a couple of hundreds whenever we can. We bank with AIB as well, so online transfers from our current account to our mortgage accounts should be easy to make. We haven’t tried that yet in case we’re not supposed to.
Thank you.
For the five year rate there should be no break fee.Hi all,
I'm currently planning on taking out a 5yr. fixed with AIB @2.95% - The issue I have is that there are outstanding issues with contracts which could mean that I'll have to return the money to AIB after the drawdown happens (should they not be resolved). Of course, in an ideal world all issues would be remedied before drawing down unfortunately that won't be the case for many reasons.
The question I have is what is the worst case (penalty) I'll be liable to for early breakage? Let's assume I'm taking out 200k in this example and decide to pay it back in 2/3 months where the 5year fixed product would still be offered at 2.95% for my LTV. According to my calculations the early breakage is 0 however AIB couldn't confirm this for me when requesting clarification.
Thanks in advance.
@HouseBuyer10 See my reply to your post in the switcher thread – if you haven't already.Should we ask for a break fee and, if still zero, fix both for 5 years now or wait until 2024?
Just to be clear, overpayments and refixing are two separate things.the previous ability to restart the fixed rate period at the original 2.1% after making an overpayment is gone?
Thanks and yeah I know they are separate, it was more down to the nuance for a while of a rock bottomed green rate meaning that when I and others previously overpaid AIB would break the fix rate and of course you can then avail of the full 5 year green rate again at the same low rate from that point. Given the rate increases that has now gone?Just to be clear, overpayments and refixing are two separate things.
If you are currently on the 2.1%, you can make overpayments and you won't face any break fee for doing so esp now that all of AIB's rates have gone up
If you were planning to restart the 5 year term then you can only do that at 3.1% now. So probably not a good idea. But there is no overpayments involved in refixing
That's not how it works.previously overpaid AIB would break the fix rate and of course you can then avail of the full 5 year green rate again at the same low rate from that point
My understanding how AIB did it, and I saw it with the fixed term being reset, was to allow a lump sum payment they break the fixed rate and as you say with zero charge, and then refix you for a term. The term they gave me was a full five years again. I made the overpayment very early into my fixed rate period / drawdown of the original mortgage so maybe that had something to do with the 5 years being reset.That's not how it works.
You do not break the fixed rate when you overpay. Your overpayment is subject to an ERC which we know will be zero. But your existing fixed rate continues unchanged, e.g. if you are 1 year in, you will still have 4 years after any overpayment
To refix the entire principal is an entirely separate form and has nothing to do with overpayments
I had a look back at the documentation I received from AIB when I first requested a break fee and I think I understand where the confusion is coming from. The language used by AIB in that letter is a bit ambiguous.My understanding how AIB did it, and I saw it with the fixed term being reset, was to allow a lump sum payment they break the fixed rate and as you say with zero charge, and then refix you for a term. The term they gave me was a full five years again. I made the overpayment very early into my fixed rate period / drawdown of the original mortgage so maybe that had something to do with the 5 years being reset.
If you wish to proceed to break from your fixed rate, we require a signed authority from all parties to the mortgage loan instructing us to break you out of the fixed rate by close of business dd/mm/yy
Paul, thank you so much!@HouseBuyer10 See my reply to your post in the switcher thread – if you haven't already.