Shorten the Mortgage Term Question

Hi Am am reading lately about interest rate rises so am using the calulators online to see what my best options are fix or stay on tracker and if I stay on tracker I can pay off lump sums to shortent the term but how do you work out how much to shorten the term by as a rough guide asI am sure the bank could tell me, as an example if I put in my ssia in 2007 means I had my mortgage for 27/28yrs left from 30 and I plow in 20K how much do I work out how much to reduce the term by so I can put it into the calculator to see what a difference it makes on my repayments?. I hope I am making sense.

Thanks
Colly

Have you tried Karl Jeacle's mortgage calculator which illustrates the effect on overall interest costs and effective mortgage term if you make lump sum repayments (and, for example, maintain the originally agreed repayments thus shortening the effective term)? You enter the original mortgage details and then you can also enter any lump sum capital repayments that you decide to make to gauge the effects. Have you also checked out all the other existing threads on fixed versus variable/tracker and acclerated repayment strategies?

Thanks Clubman


In such a quandry as to fix or not to fix, I love the idea of making lump sum repayments and I believe you cannot do that when you have fixed. I have to trawl through all the threads alright. I can afford up to 1% increase as I am renting a room and have had no problems renting it. Even if I couldnt rent it would just mean lesser money to save but I could afford a 1% increase, as for more than 2% I would be very pushed but then again almost half of ireland would be in the same boat so cant see it happening too soon. But .5% is on the cards before march so those are the figures I have being working into Karls mortgage calculator. In general and i know it is very hard to generalise financial situations but if you can afford to not fix if it goes by 1%. I predict banks are very good at calculating what to fix at so if u can afford not to fix it is a good idea if u plan to make lump sums and shorten the term by enough to keep the repayments affordable and lessen the time the bank can charge u interest?

Quick question can you make lump sum repayments if your on a tracker mortgage?

CollyD said:

In such a quandry as to fix or not to fix, I love the idea of making lump sum repayments and I believe you cannot do that when you have fixed.

Click to expand...

You generally can but will be charged significant fixed term early breakage fees.

Can I ask, does anyone know of a calculator like Karl's that will allow you to play with the interest rates? Say to up the rates after 2 years on a fixed rate?

CollyD said:

Quick question can you make lump sum repayments if your on a tracker mortgage?

Click to expand...

A tracker rate is simple a variable rate with a guaranteed margin and, as such, capital repayments can be made without penalty. Some lenders may impose some minimum lump sum capital repayment that they will accept though. However they cannot charge the borrower for making capital repayments on a variable/tracker home loan or for redeeming it early.

CollyD said:

In such a quandry as to fix or not to fix, I love the idea of making lump sum repayments and I believe you cannot do that when you have fixed. I have to trawl through all the threads alright.

Click to expand...

At least one lender (IIB) let you fix the rate on part of your mortgage (say 75%) and have a variable rate on the other (e.g. 25%). You can then make your lump sum payments against this variable rate portion without penalty, whilst having the bulk of your mortgage interest fixed.

CollyD said:

....I could afford a 1% increase, as for more than 2% I would be very pushed but then again almost half of ireland would be in the same boat so cant see it happening too soon. But .5% is on the cards before march ....

Click to expand...

The fact that half of Ireland would be stretched if mortgage rates increase will have little to no influence on the ECB's decision to raise rates. Whilst the ECB should consider the interests of the whole Eurozone it is a fact of life that rates are set with the biggest countries in mind as they represent the biggest proportion of the Eurozone economy. If rates were being set with Ireland in mind (e.g. if we were not in the Euro) then rates would likely have been increased already.