Pay Lump sum of Mortgage - Bank wont let me

M

minion

Registered User
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I have a variable rate mortgage with First Active.

I asked them about paying €10K of it in a lump sum and they told me i cant. The minimum payment is €15K.
Surely it must be legal for a bank to prevent you reducing your mortgage.

I'd understand if it was a fixed rate but its variable.
 
It's illegal for lenders to charge borrowers a fee to make accelerated capital repayments on their owner occupier home loan. However I don't think that it's illegal for them to put limits on the minimum lump sum that they will accept. Check the terms and conditions of your loan agreement. Perhaps tell them that you're considering moving to a more cooperative lender and see if they change their tune. If there is a cheaper lender for your situation then certainly investigate the benefits attributable to switching.
 

But not letting me do it is costing me more in interest and making them money. Sounds like a fee to me.
 
It's not a fee and to claim it as such is a bit of a stretch of the imagination. If this is a Letting Off Steam issue then I can move it to that forum if you like. Otherwise if you are looking for constructive feedback try not to drag the thread off topic.
 
Perhaps you should think about/threaten them with moving your mortgage to another bank? That would probably concentrate matters a little and may even introduce some flexibility into their seemingly entirely arbirtrary rules.
 
Yes, threaten to move. You can fold your 10k into your new mortgage to bring it down. Give Ulster Bank a call. They will pay your fees too
 
First active dont seem to give a damn if you refinance else where... but its worth trying, they are within their rights to stipulate a minimum lump sum capital reduction although this would of had to have been in the terms of conditions of your loan offer.
 
I think you should just move your mortgage then. It sounds like you could get a better deal. I thought every mortgage allowed for lump sums of any amount once a year at least.
 
My mortgage is with first active and they do allow you to make over payments so why not just increase your monthly payments by 1,000 and pay off the 10,000 over ten months. You could then revert back to your normal payments.
 
Give Ulster Bank a call
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Just to let you know First active & Ulster Bank are one and the same now trading names for Royal Bank of Scotland in Ireland
 
asdfg said:
Just to let you know First active & Ulster Bank are one and the same now trading names for Royal Bank of Scotland in Ireland
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This does not mean that there will be no sense of competition between them. In fact it may be greater.
 
I think that is a disgrace. Your lender should be flexible. There are plenty of lenders out there eager for your business and ones that offer flexible terms. I previously had my mortgage with First Active and I found them a nightmare to deal with. We sold our house and there was only one month left on our fixed rate yet they charged us a penalty of 6 months interest which was nearly 3,000! We had to close as we would have lost out on our new house. We have since taken out a mortgage with IIB Homeloans and they are very fair & flexible. It is possible to make lump sum payments at any stage in the mortgage even if you are in a fixed rate.
 
daveac said:
I think that is a disgrace.
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It's only a disgrace if it's not stated in the loan agreement terms and conditions and only introduced out of thin air later on. Otherwise the fact that some borrowers don't apprise themselves of the details of their loan agreements is hardly the lender's fault
There are plenty of lenders out there eager for your business and ones that offer flexible terms.
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Indeed - shop around before and after taking out a mortgage.
We sold our house and there was only one month left on our fixed rate yet they charged us a penalty of 6 months interest which was nearly 3,000!
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As above - this was presumably in your loan agreement terms & conditions so you were presumably forewarned. See this thread for more on fixed rate breakage penalties.
We have since taken out a mortgage with IIB Homeloans and they are very fair & flexible.
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Fixed or variable? Have you read the loan agreement terms & conditions?
It is possible to make lump sum payments at any stage in the mortgage even if you are in a fixed rate.
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Are you really sure about that!?
 
First active do a current account mortgage, if you're not in this already might it be possible to switch to it, then you can just leave the 10k in the current account which would have the same effect as paying off a lump sum with the advantage you could use the money if you needed to.

From [broken link removed] it sounds as if the restriction comes from a 5% stipulation (implies the mortgage was 300k to start with) but it also says that you can do use the 10k as an additional payment rather than a lump sum payment, the effect on interest should be similar. In fact it sounds like an extension of the current account mortgage to the regular mortgage.

First active seem to like these unusual extra rules in the T&C, someone mentioned here recently that if the money in your current account exceeds the mortgage they automatically payoff the mortgage, which I'd imagine is unlikely to be what a customer would actually like done.
 
ashambles said:
First active seem to like these unusual extra rules in the T&C
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If they specify these in the Ts&Cs but some borrowers don't read them then that's their (the borrowers') problem.
 

You could do that but it will cost you about 1,000 euro to setup! Probably defeats the purpose.
 
Yes, indeed it is a disgrace about the penalty for breaking out of my fixed rate and very unfair when you think about the logic of it. It hardly cost First Active 3,000 for me to break out of that fixed rate when there is only one month left on the fixed rate. I checked with IIB Homeloans before fixing my mortgage regarding breaking of my fixed rate. IIB Homeloans are much fairer in that the penalty charged depends on the cost of funds when you went into the fixed rate and when you break out of it, sometimes there may be no penalty as it depends on how much IIB Homeloans bought the money for at the time I fixed and how much the money cost now. Much fairer. There is no way it would ever cost 3,000 when there is only one month left to go.

IIB Homeloans most definitely allow you make lump sum payments while on a fixed rate as I have done this. They allow you to pay up to 10% of your mortgage balance each year if you are on a fixed rate. There is no limit or minimum on the amount that you pay if you are on a variable rate. Fair and flexible which is the way all mortgage lenders should be.
 
I still disagree that it's a "disgrace" if the penalties were detailed in the Ts&Cs.
 
DaveAC said:

We sold our house and there was only one month left on our fixed rate yet they charged us a penalty of 6 months interest which was nearly 3,000!
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I don't think that this is reasonable at all, even if it is in the terms and conditions. My understanding is that a penalty must be related in some way to the cost to the bank. I would definitely take this to the Financial Services Ombudsman who has declared that a 6 month penalty in an Irish Nationwide variable rate mortgage was wrong:

See this thread for further information.

Brendan
 
ClubMan said:
I still disagree that it's a "disgrace" if the penalties were detailed in the Ts&Cs.
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Thanks, We heard you the first 4 times though.

An update. Went in and told them i was going to move my mortgage and no dice. They just said that it would cost me in solicitors fees. I then told them to get whatever paperwork i need to take to another bank that covered the solicitors fees. Off she went and came back and told me i could pay the money off now no problem. I asked would it be ok to do this whenever i liked, because if i couldnt then i was still moving.
She went off again and came back a few minutes later and said that was fine.
 
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