Pay lump sum off mortgage and then fix with BOI or switch to AIB variable and then pay off lump sum?

S

Sully11

Registered User
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Hi All,

we have a variable mortgage with BOI for approx 207k left and 25 years. We don't know whether to switch to AIB variable at 2.75% and pay off a lump sum and then overpay the mortgage, we could afford about 1500 a month or to pay off the lump sum off the current BOI mortgage and then fix for a shorter period and have the fixed payments around the 1500 mark.

i think i am moving towards fixing at 3% with BOI as like the idea of a fixed monthly amount.

We get 2K from AIB for switching fees and our solicitor and survey would cost 1500.

We could put in a lump sum 60k to 70k into the mortgage.

so what would people think is the best thing to do?

is this sensible?
 
Hi, are you at the end of fixed rate now?

AIB cashback is a fixed amount regardless of balance. So pay off lump sum as soon as you can. Switching process could take around 3 months, so better to save interest for that period.

If you pay off lump sum, with a remaining balance of 150k, you'd need to reduce term to 10 years for repayments of 1500 per month. For a fixed rate mortgage you'd need to reduce term first and then fix. That's a permanent adjustment to your agreement. If you ever wanted to reduce repayments in future, it would be at banks discretion. (You can of course pay off lump sums on a fixed rate, subject to bank calculating if a break fee is due). If reducing your term and balance that significantly, gave a look also at your mortgage protection as you should be able to reduce cost of that.

Or fix for 12 months, and pay off any extra you've saved up, then fix again.

With a variable rate, you could keep term at 25 years, but pay extra whenever you want.
 
On a BOI variable currently at 3.6%.

If i was fixing i would reduce term to 10 years and pay off lump sum before fixing. That would make payments of 1400 pm. And then after 5 years just pay off another lump sum if we can afford to.
 
Given that you like the idea of a fixed repayment, I'd say go for it. Pay off lump sum immediately, shorten term to what you are comfortable with, and fix for 5 years.
Any potential rate saving in the short term is offset by paying 3.6% until you can switch.

Remember with BoI you can ask for your monthly repayment to be increased by up to 10% while in a fixed rate without incurring a break fee.

Also, if there is any significant decrease in mortgage rates in the near future, it could well be worth your while requesting a break fee calculation and refixing.
 
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