PTSB Mortgage holders to get 10pc bonus for paying lump sum off trackers

Butter said:
Wonder why he says it is a good deal for buy-to-let investors in that piece. I don't see how?
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The deal made sense for buy-to-let investors, if they had the spare cash, Mr Conway said.
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I don't agree and I have emailed Frank Conway to find out how he arrived at this conclusion. It makes less sense for buy-to-let investors than for home owners for the following reasons:

  • The borrower gets tax relief on the interest paid on the buy-to-let mortgage
  • The loan is more likely to be long-term. Homeowners often have to sell because they want to move homes. Investors can keep their property.
  • Buy to lets are more likely to be interest only than repayment.
Against these, the buy to let mortgage might have a higher rate of interest, but if they are trackers, probably not.

I haven't gone through your figures Butter, but I presume that they show that it's less attractive to buy-to-let investors.

Brendan
 
Brendan Burgess said:
I don't agree and I have emailed Frank Conway to find out how he arrived at this conclusion. It makes less sense for buy-to-let investors than for home owners for the following reasons:

  • The borrower gets tax relief on the interest paid on the buy-to-let mortgage
  • The loan is more likely to be long-term. Homeowners often have to sell because they want to move homes. Investors can keep their property.
  • Buy to lets are more likely to be interest only than repayment.
Against these, the buy to let mortgage might have a higher rate of interest, but if they are trackers, probably not.

I haven't gone through your figures Butter, but I presume that they show that it's less attractive to buy-to-let investors.

Brendan
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I based the numbers on an example "close to home" Brendan and for me it certainly doesn't look worthwhile. It would take a pretty steep rise in the ECB rate before it would start to "break-even" for me when I weigh the reduction in overall repayment against tax relief and interest earned over the remaining term.
I think it would be important for everyone who may be contemplating this offer to work out the relevant figures for themselves. Prehaps a bigger mortgage, at a higher interest rate with a bigger lump sum repayment would look different.
Even it is was my own home mortgage I'm not sure I would go for this deal. Cash is king to me at the moment and I don't think I'd lock it away for good if my tracker was at a low rate, which many of PTSBs trackers are.
 
Butter said:
Just did a few calculations on the value of this deal to someone with an investment mortgage and a tracker of 0.8% above ECB using Brendan's link
http://www.loanclc.com/

€100,000 outstanding with 11.5 years to run.
Total repayments = €110,781

Pay €5,000 off mortgage and get €500 credit from PTSB.
Total Repayments = €104,688

Saving €6093 in total repayments - but this has cost you €5,000 to benefit by €1093 over 11.5 years.

Factor in the reduction in interest & the subsequent rise in tax of €497 over the 11.5 years (assuming no changes in the tax regime for landlords).

Factor in having my €5,000 available to me with a small interest accruing (let's say 2% p.a less DIRT) each year which would give me €866 in interest over 11.5 years from this link
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

€497 + €866 = €1363 v €1093 (saving from PTSB deal)

So in this case a landlord would be worse off by taking this offer.
These calculations assume that interest rates stay at the current rate over the 11.5 years. Of course this won't actually be the case.

With ECB rates at 2.00% the deal would save €1440 but would cost €700 in lost tax relief & €866 in interest = €1566.

With ECB rates at 3.00% the deal would save €1798 but would cost €914 in lost tax relief & €866 in interest = €1780.

So I think the ECB interest rates would have to be over 3.00% for the full 11.5 years before there would begin to be any advantage at all to taking the deal for an investment mortgage holder. At what point it becomes an advantage to tie up €5,000 is debatable. The ECB rate would have to be 6.00% over the full 11.5 years to gain €373 by paying off €5,000 and that's assuming that the saving interest rate stays at 2% less DIRT.

So whatever about this possibly being a good deal for home owners - I just don't see the advantage for an investment mortgage holder (the caveat being the figures that I have used).
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I just went back for another look at the figures and there is a way in which you could benefit more from this deal - reduce the capital but keep your repayments at the old level.

In the first example it would change the figures like this:

€100,000 outstanding with 11.5 years to run.
Total repayments = €110,781

Pay €5,000 off mortgage and get €500 credit from PTSB. Keep repayments at the old level & knock 9 months off the length of the loan.
Total Repayments = €104,008

Saving €6773 in total repayments - but this has cost you €5,000 to benefit by €1773 over 10 years & 9 months.

Factor in the reduction in interest & the subsequent rise in tax of €415 over the 10.75 years (assuming no changes in the tax regime for landlords).

Factor in having my €5,000 available to me with a small interest accruing (let's say 2% p.a less DIRT) each year which would give me €806 in interest over 10.75 years from this link
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

€415 + €806 = €1221 v €1773 (saving from PTSB deal)

So, if I haven't completely mixed myself up - it is possible for buy-to-let investors to benefit from this deal - pay down the capital but keep repayments at the old level and it could well be worthwhile, even taking into account the loss of tax relief. But in this example you would need to keep in mind that you have lost access to €5,000 for nearly 11 years to benefit by €552.
 
Brendan I think your estimate is somewhat over optimistic at the current offer level particularly if it is due to expire in mid June
 
I think they would have a much better take up if they allowed 10% on monthly over-payments. A lot of people dont have lump sums, but could handle higher monthly payments easier.
 
I agree with minion, but this probably would not help them achieve their short term capital objectives. Maybe a combination of both options would be considered going forward.
 
minion said:
I think they would have a much better take up if they allowed 10% on monthly over-payments. A lot of people dont have lump sums, but could handle higher monthly payments easier.
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You are right, but the administrative hassle would outweigh any benefits to them.

Save up the overpayment. Borrow a bit short term and pay off €5,000 before the deadline
 
I got a letter of offer for this this morning from TSB.
I'm thinking of paying a bit off mine.
I've 12 y.5ears left, 136K on ECB +1.25
 
I got a letter of offer this morning from PTSB.

I see that the offer reduces the length of your mortgage and not the actual monthly amount. Your mortgage repayments remain the same for a shorter duration.

I had hoped that the offer would reduce my monthly outgoings so that in the event of job loss or further reduction in hours I would have a better chance of paying the mortgage. Im a bit disappointed. Will have to do a bit more thinking about it than I thought..
 
A friend of mine has a Tracker with PTSB (Euro +0.8%). Owes about 50k with 5 years left.He has 5-10k spare cash on deposit( even factoring in a rainy day).Was wondering if there is any indication yet of the take up rate on this offer as he is in a dilemma to know what to do. Some are saying "Cash is King" and hold on to it; Others are saying a better offer will be made by PTSB if take up is poor and even others, Brendan included if I read it right who would feel it is too good an offer to refuse. He's in as stable a private sector job as there is and can cover repayments comfortably. Any thoughts on site on what he should do.
 
With 5 years to go, this is a great deal for your friend. He should take maximum advantage of it.

The only issue is whether there will be a better deal afterwards. I just don't know.
 
How does PTSB treat overpayments on mortgages?

There wasn't much greater detail than I've presented. Clear the mortgage within 6 months and the you lose the entire bonus.
 
Can't make up my mind!

I've read through the two threads, at first I thought this would not be a good deal for me, then I thought it would, now i just don't know!
I have an investment mortgage of €80,000 at ECB+0.8% (2.05%) with 14.5 years left. I am not making overpayments at the moment, but would plan to redirect regular savings to the mortgage when rates swing the other way (12 months time?), I'm currently getting 3.5% gross on savings, ironically also with ptsb! In 14.5 years I will be 67 so I would plan to reduce the term in the future by a combination of lump sum and overpayments, but that's probably 1 to 3 years away, depending how rates go.

Butter, your figures would seem to say that I should take some (€20,000) advantage of the offer now, getting a bonus to do what I would plan to do in 2 years time anyway?

Brendan, your thoughts would seem to suggest it's not a good deal for me, or have I read you wrong?
 
Ris said:
By the way, does anyone know if lump sums paid off mortgages in the normal, way are treated the same, i.e. they come off at the end of the term?
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I paid a lump sum into my PTSB tracker a few years ago, requesting it be taken off the loan amount, they immidiately reduced the outstanding amount, left the repayment level the same and reduced the term. So I benefited straight away. I would expect them to do the same with this overpayment and bonus, but will ring to check.

Many many years ago, when I had my first mortgage with them on my PPR, I used to leave my repayments unchanged when rates dropped, but noticed they didn't credit the overpayments until the end of the financial year. Not sure if they have changed that practice.
 
ricta said:
I have an investment mortgage of €80,000 at ECB+0.8% (2.05%) with 14.5 years left. I am not making overpayments at the moment, but would plan to redirect regular savings to the mortgage when rates swing the other way (12 months time?), I'm currently getting 3.5% gross on savings, ironically also with ptsb! In 14.5 years I will be 67 so I would plan to reduce the term in the future by a combination of lump sum and overpayments, but that's probably 1 to 3 years away, depending how rates go.


Brendan, your thoughts would seem to suggest it's not a good deal for me, or have I read you wrong?
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I don't think it's a good deal for you at all but you will have to work out the numbers for yourself using the approach in this thread.

You are paying 2.05% gross, which is around 1% after tax. You can earn around 2.5% net on deposit.
 
Ris said:
I got a letter of offer this morning from PTSB.

I see that the offer reduces the length of your mortgage and not the actual monthly amount. Your mortgage repayments remain the same for a shorter duration.

I had hoped that the offer would reduce my monthly outgoings so that in the event of job loss or further reduction in hours I would have a better chance of paying the mortgage. Im a bit disappointed. Will have to do a bit more thinking about it than I thought..
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This seems fair enough to be honest.
 
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