What to do with my "split" mortgage...

Hi all, I couldn’t find anywhere where a scenario like this has been discussed, please feel free to move if this has been posted elsewhere.

Here is a brief synopsis of my current mortgage situation:

• August 2005 - Took out a mortgage with AIB for €279,000. Generous rate for fixed one year term
• August 2006 - Year one rate came to an end. At this point I couldn’t decide if I should opt for a fixed term or tracker, so I took both: I opted to move €100,000 to a tracker rate (a separate loan) and fixed the balance at a variable rate for 3 years. Doing the math on the interest rates at the time it seemed like a reasonable way to hedge future payments (I'm open to correction on this )
• August 2009 – At the end of the 3 year term I agreed with the bank to continue paying the variable portion at the current rate for another 9 months until I decided to fix.
• May 2010 – Opted to fix the variable rate portion for a 2 year term, which will end in May 2012.

So, in May this year I have a decision to make regarding the ‘variable’ portion of my mortgage.
I have some questions which mortgage gurus among you might be able to answer These might seem straightforward but I just want to sanity check my own thoughts:

1. Given that I have a tracker loan already, would I be able to consolidate the two loans to into one tracker loan? I know the bank are keen to eradicate tracker loans so I don't know if its a possibility.
2. Should I continue to keep my tracker loan OR consolidate both loans into one at variable rate for a fixed term? i.e. giving up my precious tracker loan.
3. What other options, if they exist, should I consider?

Rates I am currently paying:
Tracker: 2.100%, balance = €90,356
Variable: 5.090%, balance = €158,432


Thanks in advance for any help

Hi PMCE,

IMO option 1 is not a option. Why would the bank do this? What is in it for them? They don't give trackers any more so you can't move the full mortgage to variable.
Option 2 - I can't see what's in this for you. Why would you give up a tracker. DON'T DO THIS UNDER ANY CIRCUMSTANCES. While it's certain that interest rates will rise, they won't rise by large amounts any time soon.
Two questions:
a) What rates / options have you been offered to fix the variable rate component?
b) Can you overpay the variable part only ie divert any spare cash you have into the variable part of the mortgage? Is this an option for you?

In summary, keep your tracker. Take as long as you need to pay it down, see how much it costs to fix. Pay off as much as you can on the variable part before fixing.

Thanks Macstuff, I was fairly sure that Option 1 wasn't a runner but just wanted to check. I agree on Option 2, giving up my tracker is certainly not what I want to do but, again, wanted to float the idea with the experts to make sure my assumptions are correct.

To answer your questions:
a) I've had no communication from the bank re. rates / options as yet - I presume they will contact me in due course but I will contact them today to get the ball rolling.
b) Regarding overpaying the variable loan - I have approx €20k in state bonds which will mature in later this year. I have been thinking about using it to pay a lump off my variable loan, but will I incur a penalty for paying off the loan in this way? Also, I wont get my bonds back until October this year so I will likely miss the opportunity to may a lump sum payment before agreeing new terms with the bank. Any advice you can give me on this is much appreciated.

No penalty will apply for overpaying a VR loan. Make sure that you have no need to access these funds for other purposes in the future.
The new terms are likely to be a continuance on VR or option to fix. Any fixed rate would still include a significant Bank margin and preclude the option of paying off lump sums without penalty.

Thanks 44brendan.

44brendan said:

The new terms are likely to be a continuance on VR or option to fix. Any fixed rate would still include a significant Bank margin and preclude the option of paying off lump sums without penalty.

Click to expand...

Forgive my ignorance here: In theory could my VR mortage remain at a VR until I have it all paid off? i.e. never fixing it again for the duration of the loan?

Right now I am 7 years through a 35 year loan, but I hope to at least halve the remaining 28 years by making lump sum payments along the way and if I can only do this with a VR then thats what I want to stay on.

pmce said:

Forgive my ignorance here: In theory could my VR mortage remain at a VR until I have it all paid off? i.e. never fixing it again for the duration of the loan?

Click to expand...

Yes, you have a Variable rate mortgage. Unless you request a fixed rate, it reamins a VR mortgage for the term of the mortgage.

Thanks huskerdu.

I'm on a steep learning curve here. It's frightening just how little I know about mortgages despite having one. Embarassing really. Determined to get a handle on it this year though.