Should I pay lump sum off fixed mortgage 5.59%

Income details
Net monthly (i.e. after tax)
Income self: 3130 per month
Spouse: 780 every two weeks net

Amount of child benefit received: 260
Amount of Mortgage Interest Supplement received: In year 8 v little

Personal circumstances
Two adult family
Do you need a car for work or do you use public transport?
Number of children 0- 2 years old: 1
Number of 4 - 11 years old: 1(pre school)
Monthly childcare costs: 400 relative.
Montly spend on special circumstances: e.g. exceptional healthcare costs
VHI taken out of my wages by work.

Home loan
Lender: EBS
Amount outstanding: 243,000
Value of home: In positive equity. 4 bed detached dormer bungalow. 1/2 acre site.
Interest rate: Stupidly fixed for 10 yrs when took mortgage out in 2007. fixed rate 5.59.
Monthly repayment: 1591.78
Amount in arrears: Not in arrears

No credit cards.
No car loans.
2 cars needed for going to work.

Other savings and investments

Do you expect any lump sums in the medium term future?
Redundancy 42k redundancy from previous employment. Sitting in bank.

My query is should I put 42 off mortgage or leave it in bank or put a portion of it off mortgage.

Mortgage term is 25 years due to finish in 2032.
Was approx 275 when we started. Now 243.
Fixed term 3 years to run I think by my calculations.

We are managing ok with payments.

If you pay it back there will be a penalty, normally 3 months interest. Can you look up your mortgage documentation to see how much it is. What is the current variable interest rate with EBS? KBC are offering 1K towards switchers and you mention you are in positive equity. What is that equity.

Thanks for reply Bronte

I would estimate house would sell for 290 min.

Its on commuter belt. 2,700 sq foot.

So you'd be maybe looking at 85% mortgage to value. Have you looked up KBC mortgage rules and interest rates? Might be a negotiation ploy with EBS to get them to release you from the fixed rates. Not sure if they will play ball though, worth a shot though.

I see EBS variable for existing is 4.7%.

KBC is 4.56% for between 80% and 90% new business mortgages, but they have a nice 4.06 if you are at 60% to 80%, which you would be if you paid off the lump sum of say 40K (so 70%) and brought the loan to 203K versus value of 290K one year fixed available. You wouldn't have to even use all the lump sum to get that rate, 10K will do. So loan of 233, paying off 10K makes it 80%.

What you need to calculate is how much each mortgage would cost, and how much switching costs, and how much breaking the 10 year fixed would be and then seeing if it's worthwhile, bearing in mind that there are only 3 years to go for the end of the fixed rate.

Before doing anything else get a copy of the original documentation and check whether the mortgage is supposed to roll onto a tracker rate at the end of the fixed rate.

Ring the bank and ask for a price for the break cost of the fixed rate - what they will charge you to either change the whole lot to variable (after which you can pay off lump sums no problem) and also for a price to pay the lump sum off the fixed rate.

Also ensure that you will not need the money for a good few years - no point paying off some mortgage and then borrowing for a car next year!

Documents show that we go onto a SVR.

Ideal scenario would be not to use all the 42k to have a nest egg just in case etc.

I have emailed EBS rep and await response re what cost to break fixed rate is.

Some fixed rate contracts allow a certain amount of overpayment (e.g. 10% of the total amount) without it being subject to a charge for breaking the fixed rate. Is there any allowance for this detailed in your contract?

EBS want 33k to break rate

It's not too bad

You are paying 5.6% vs. 4.7% SVR from EBS.

A three year fix would cost you 4.9% or thereabouts.

So you are overpaying 0.7% on €243k or €1,700 a year.

Not worth €33k!

I presume that the €33k is to break the full mortgage.

Will they allow you pay a lump-sum off your mortgage and, if so, at what penalty?

Are you unemployed? You could apply for MARP and see could you do a deal through it.

Brendan

The OP is in employment and not in arrears so MARP is not an issue. 33k seems incredibly high given there's only 3 years left on the fixed rate, is this figure correct?

Yes 33k is correct. It's €33,200 to be precise