paying lumpsum off mortgage 20k-25k

connor141013

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myself and my partner are 2 years into our 29 year 196k mortgage from ebs we are currently paying 864 euro per month.for our 3rd year starting in march 2020 we have the option to stay on our fixed for 1-5 years at 2.90% or variable at 3.50%
my question is if we pay 20-25k in a lumpsum off our mortgage on fixed or variable is there a penalty for this or will we have to pay the interest anyway on the lumsum.or will we just stick with the fixed term and just carry on paying our 864 per month?
any advice is greatly welcomed thanks all.
 
Hi Connor

There is no penalty for paying a lump sum off a variable rate mortgage. It is prohibited by law.

If you pay a lump-sum off a fixed rate mortgage, there is usually an early repayment penalty.

Some lenders allow you to repay up to 10% of the balance without penalty in any one year. But I don't think that the EBS has this.

But if you have the money now, pay it off as soon as the fixed rate ends.

What is your loan to value? Have you looked at switching to a cheaper lender?

Brendan
 
But if you have the money now, pay it off as soon as the fixed rate ends.
I'd go against you on this.
If I was on a fixed rate and had cash lying around, I'd pay it off the mortgage. The interest saved will always be greater than any possible break fee.

3rd year starting in march 2020 we have the option to stay on our fixed for 1-5 years at 2.90% or variable at 3.50%
Just re-read your post.
Is your current fixed rate coming to an end and you can go into a new fixed rate?
If that's the case, if you pay the lump sum when the first rare ends in March, and then go into a new fixed rate, there'll be no break fee.

But as @Brendan Burgess mentioned, you might also take the opportunity to see if you can move to a better rate with another bank.

If I've misunderstood the question let me know what you want to understand and I'll have a look at it.
 
If I was on a fixed rate and had cash lying around, I'd pay it off the mortgage. The interest saved will always be greater than any possible break fee.

I don't think that is relevant here as his fixed rate is ending next month.

But it's a very interesting point which I had not thought of. Is it always true?

Brendan
 
But it's a very interesting point which I had not thought of. Is it always true
Yes, it's always true in practice. It's not a law of physics or anything, but logically. If you're paying 2% per annum, interbank rates would need to drop 2% before break fee would match the interest savings.
 
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