Pay off part of mortgage with lump sum?

[Auriol]

I currently have a two year fixed rate mortgage of 4.5% (end of two years will be July '09. Life of Mortage is 35 years and I am three and a half years into the mortage).
Can I pay off some of the mortage during this two year fixed term or would I be better off waiting till the end of the two year fixed period?

Currently I can pay off €12,000 or if I wait till the end of the fixed period I would expect to be able to pay off €24,000.

What are the advantages of paying off part of mortgage with lump sums, what are the costs involved? Would it be a wise thing to do?

Any advice?

 

[irishlinks]

Your lender may have conditions on the fixed rate loan that could penalise you for paying some of it off early - you really need to ask them.
If they don't let you - or it is going to cost you to do i - just put the money into a savings account until the fixed period is over. You can get 5.3% on lump sums at Anglo Irish or look at the Best Buys thread for more info on Regular Savings accounts.

 

[ClubMan]

What are the advantages of paying off part of mortgage with lump sums

It saves money long term. Especially if you maintain the regular repayments at their normal level so that the lump sum repayment reduces the effective term of the mortgage. Look at Karl Jeacle's mortgage calculator to get an idea of the potential savings involved.

what are the costs involved?

None with a variable/tracker rate owner occupier mortgage. Depends on the loan agreement with a fixed rate mortgage or

Would it be a wise thing to do?

In general - yes if you have money spare, no immediate use for it, you are on a variable/tracker rate or the fixed rate penalty is small/negligible, you don't have higher cost debts to clear first and you won't end up reducing/clearing the mortgage only to borrow at higher rates soon after.

Any advice?

If you do ever go for an accelerated lump sum or regular capital repayment approach then make sure to outline your intentions in writing with the lender and get their written agreement. In some cases if you don't explicitly tell them they may not put any additional sums off the capital.