What happens when you pay a lump sum off a morgage ?

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eyesgreen_1

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Hi..Just wondering when you pay a lump sum off your morgage does it just reduce in years or does the repayment amount reduce also ?...for example I have a morgage that is €1018 per month with 28 years left to pay..on a present a fixed rate of 5.6%...if for example I paid a lump sum of €20,000 off my morgage what would be the effect on years and repayments ?...any advice on this would be much appreciated.Thanks.
 
We paid €70,000 off our mortgage about 2 years ago. It was a variable rate with payments of €1100 a month. We continued to pay the same amount every month. Nothing changed. I think the payment amount and the term of the loan are locked into the computer and will not change automatically. You need to contact your lender to have any changes made i.e. reduce your monthly payment or term of the loan. My OH has always taken our home loans over the longest possible term and paid it off fast......something to do with paying less interest I think.
 
I might be wrong but I don't think you can pay a lump sum off a mortgage while you are on a fixed rate.
 
with my mortgage you can pay off one lump sum during the fixed term and this reduces the term of the mortgage so best to check with your particular lender
 
Just in case you haven't seen this before, this calculator is very useful to see the effects of a lump sum payment off a mortgage, in terms of interest paid etc over the term of the mortgage. It will also look at other factors such as extra monthly payments, changes in interest rates.
http://www.drcalculator.com/mortgage/ (Karl Jeacle)

(This calculator is often referred to on AAM).

On a non fixed rate mortgage you should normally either be able to reduce the monthly payments, and keep the term the same, or else keep the payments the same and reduce the term, if you pay off a lump sum.
This would have to be agreed in writing with the bank first however, and specifically, they would need to confirm that a lump sum payment would come off the capital, in writing. It also depends on the terms and conditions of your loan contract.

For your situation, you would need to check with the bank to see exactly what they allow

Nicola
 
hi thanks all you guys for your replies..thats really helpfull...my fixed rate is up in november so ill need to check with the bank about what they allow in my contract...it seems it may be different in each contract or bank so ill check it all out...thanks again to all for taking the time to reply...its very much appreciated.
 
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