Paying more than the minimum mortgage repayment-how is this organised.

K

kippy

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Hi all,
My fiancee bought a house a two years ago (we have been paying an equal share of the mortage)
Anyway,
We were on two year fixed (4.25) and next month are moving over to variable tracker (4.95)
The term of the original mortgage was 25 years so there are 23 left.
How do we go about "overpaying" into the mortgage as we both have some extra cash?
Ideally I'd like to increase our input by about €300 per month.

It's a PTSB mortage if thats any help,
Kippy
 
Re: Overpaying

kippy said:
How do we go about "overpaying" into the mortgage as we both have some extra cash?
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Contact your lender and tell them how much extra you want to pay in accelerated capital repayments and when. Get them to agree to this in writing.
 
In the case of AIB, I was advised by them initially to setup a DD in parallel with the standard mortgage payment.

They then told me they would need instructions for every single direct debit (i.e. each month) to state it should come off the capital and not reduce the repayments.

So I cancelled the direct debit, save each month, and every 3-6 months send them one cheque with the instructions to lodge the cheque against the capital, keeping the repayments the same.
 
I found it easier with EBS a few years back - I just wrote to them telling them to fix my repayment at a certain level (above the normal scheduled amount) until further notice and they wrote back confirming that they would do this and what the new effective mortgage term was. I also made lump sum capital repayments from time to time in which case they issue a revised statement reflecting the new lower capital balance.
 
I was under the impression that the main banks (I am not sure about Building Society etc.) calculated interest on a daily basis on a decreasing balance, so I can not understand what the problem could be in lodging any extra amounts into the mortgage account (as long as it is not a fixed rate loan). I though it would just mean that the loan would be paid off early!! May be other Financial institutions have mortgage accounts set up differently. My daughter has a Bank of Ireland student loan and every so often she lodges extra money in and she expects to have the 5 year loan paid in 3.. So what is the difference with a mortgage a/c why is it not the same. Perhaps some one could enlighten me.
 
The problem is that some lenders will not pay additional payments off the capital balance unless you explicitly tell them to do this. If you unilaterally make additional payments then the money may simply be held in the mortgage account but not paid off the capital. This has happened to a few people as reported both here on AAM and elsewhere. This is why you really need to agree things in writing or get them to agree to pay any sporadic extra payments off capital by default.
 
Thanks for all the replies and advice.
We havent called the lender yet but are doing so later today.
I think the option that Fago76 is currently using (saving lump sum then sending to bank now and again may be the best option for us but I suppose it depends on what PTSB say.
Thanks again,
Kippy
 
kippy said:
saving lump sum then sending to bank now and again
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The quicker you make accelerated repayments the bigger the savings. It's better to make small accelerated capital repayments regularly than saving the money up and making less frequent capital lump sum repayments. As I said before just agree what you want to do in writing with your lender to avoid any confusion and disappointment. If they try to dissuade you or tell you that it's not possible then post back with further details and others can comment. In general a lender cannot refuse or impose penalties/charges for accelerated capital repayments on an owner occupier variable/tracker rated mortgage. Some may set some lower limit on the size of a capital lump sum that they will accept.
 
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