Pay down tracker mortgage early or pay Warehouse?

Paul F said:
Do lenders (or loan servicers like Pepper) have a default payment plan that they offer to the borrower when the warehoused part becomes due? Or is it the borrower's sole responsibility to arrange finance/build up savings to pay off the warehoused part?
Click to expand...

Not that I am aware of.

However, in most cases the borrower will still have a good income and will be able to keep up repayments.

The lender could put the boot in, but it would take them at least 5 years to get anywhere in the court and when the court sees that the borrower has reduced the balance , they would be very unlikely to give a court order.

So I would imagine that the lenders will be flexible with the borrowers if they have a plan to repay the warehouse over a reasonable period.

In most cases, the lenders fully provided for the warehouse so it's not really a hit on the bottom line.

Brendan
 
In the event that you wish to fully or partially redeem your Split Loan Account prior to the 1st of the month following the 10th anniversary [...]
Click to expand...

@Brendan Burgess I presume you are quoting from this document?

If so, does the following line not render the discussion in this thread irrelevant?
Warning Note: All lump sum payments must be applied firstly to the Split Loan Account. If the amount of the lump sum payment is greater than the balance required to fully redeem the Split Loan Account, the remainder of the lump sum payment will then be applied to the Base Loan Account(s).
Click to expand...
 
Hi Paul

Well spotted. If that is the case, then the OP has no choice.

However, in recent years, the lenders have been encouraging people to pay down the active mortgage rather than the warehouse.

AIB might be different. I am not sure.

Brendan
 
@Hesseny If this line is in your Split Mortgage agreement, you will (probably) have no choice about how you use the lump sum – you will have to pay it off the warehoused part:
Warning Note: All lump sum payments must be applied firstly to the Split Loan Account. If the amount of the lump sum payment is greater than the balance required to fully redeem the Split Loan Account, the remainder of the lump sum payment will then be applied to the Base Loan Account(s).
Click to expand...

That's fine because doing so (paying the lump sum off the warehoused part in 18 months' time) would be the better choice in your case – if you even had a choice. Other reasons that make it the better choice include:
  • If you wanted to get a mortgage in the next few years to pay off the warehoused part, you don't know what the interest rate would be, but it would almost certainly be higher than your tracker rate
  • If you or your partner lost your job over the next 18 months, you could reassess your plans and dip in to the lump sum as an emergency fund if needed
 
Last edited:
Thanks everyone for the advice. I will ask for a copy of the agreement and see what it actually says...
 
Hi Brendan et al, some updates over the past few months re split/warehouse mortgage

I paid 10k into my active or base loan account a couple of months ago. There has been no objection for paying into the active rather than the ware house. (after the 10k lodgment the monthly repayments were reduced but the term stayed the same. I would have preferred if the payments were maintained to shorten the term)
Can you please explain something which I cannot grasp but I am sure is obvious. With rising interest rates, the interest repayments/debits have increased from €300 a quarter up to €1020 per quarter on a 120K balance with my latest tracker rate now at 4.25%., but also my monthly repayments have increased form €1300 to €1500 per month. The increase in interest repayments is straight forward but why have the monthly repayments increased as well every time there was a rate increase, to now over €200 per month extra?
Even though the incentives (8k lodged = 10k reduction) for paying off the warehouse (125k ) run out in a years time , perhaps it would be more beneficial to pay down the active mortgage (if the bank agreed) and let the warehouse sit there at 0% for 8 years .
I think the decision of paying the active part of the loan which will cost 4-5k in interest in interest per year for the foreseeable or the the 20k bonus achieved for paying off the warehouse in full, is now not at all clear.

Any advice would be much appreciated!
 
You must log in or register to reply here.
Back
Top