PSTB Taking the Piss.

starbelgrade

Bit of a long story this, so bear with me... My brother has a PSTB mortgage which he's been paying it off every month for the last few years but was looking for a way of reducing the term of the loan. He'd a meeting with a branch manager from PTSB after many failed attempts of getting a straight answer on how to do this from the Mortgage Dept.

The manager was helpful, but found it equally as difficult to find out the information, so he got back to him a week later with two options. At the time of getting the information in July, my brother had the following set up:

Interest rate 6.1%
Monthly repayments €1192.70
Term remaining 376 months (31 years, 4 months)
Final Payment Date Nov 2042
Principal Balance (approx) €211 k
Interest due (approx) €237 k
Total (approx) €448 k

The bank manager advised him that he could go for two options;

1. Reduce the principal with a lump sum payment. The figures he gave him were based on a lump sum payment of €50k and were as follows:

Interest rate 6.1%
Monthly repayments €1192.70
Term remaining 18 years (approx)
Final Payment Date 2029
Principal Balance (approx) €160 k
Interest due (approx) €100 k
Total (approx) €260 k

2. Make overpayments of €1000 a month to get the following:

Interest rate 6.1%
Monthly repayments €1192.70
Term remaining 10 years (approx)
Final Payment Date 2021
Principal Balance (approx) €160 k
Interest due (approx) € 72 k
Total (approx) € 232k

Seemed like a no-brainer, if you can afford it, so he decided to make as much of a monthly overpayment as he could - €500 per month. Myself & my sister decided then to give him a hand & chipped in €50k between us for him to pay off the principal in the hope that in a couple of years the house might no longer be in negative equity & he could switch mortgage providers to a bank that had lower interest rate than PTSB (which wouldn't be hard).

So, he paid off the lump sum.

Then on Friday, he recieved a letter from PTSB to show him the effect that his combined lump sum payment & monthly overpayments had on his mortgage. It stated the following:

Interest rate 6.15%
Monthly repayments €1690.80
Term remaining 272 months (22 years 10 months)
Final Payment Date July 2034
Principal Balance (approx) €158 k
Interest due (approx) €301 k
Total (approx) €459 k


So instead of the interest being reduced, from July, it had increased by €64K!!

Over the term of the loan, with increased payments of €500 pm ( x 272 months = €136k) plus the €50k lump sum, that means his endeavours to reduce the term had worked to a very small extent, but it was now going to cost him an additional €185,000.

The PTSB were unable to give an answer as to how this had happened & simply said they would "look into it".

It seems unfathomable to me - my poor brother is distraught & PTSBs lackadaisical reaction to this can only leave me with the conclusion that they are taking the absolute piss.

I dunno if anyone else has had similar problems - I searched the advanced search function but couldn't find anything & as the bro isn't a Boards user, I said I'd post the question here in the hope of getting some feedback.

Any thoughts would be appreciated & I'll keep you posted on any updates or developments.

phormium

I assume he is on a variable rate.

Those figures are just wrong anyway as the option shown when paying the extra 1,000 per months shows the reduced balance of 160k that applied to the first option of paying off the lump sum so I would say they are calculated incorrectly.

If he is on a variable rate and there is no penalty involved in paying extra or lump sums then to be honest, strange as this seems, I wouldn't be too bothered about what their figures say. His mortgage will be paid off earlier and he will pay less interest if he pays extra, no question about that whatever calculations they come up with.

Try his particular details in something like this online calculator http://www.drcalculator.com/mortgage/ie/
and see what answers you get.

homer911

starbelgrade wrote: »

Interest rate 6.15%
Monthly repayments €1690.80
Term remaining 272 months (22 years 10 months)
Final Payment Date July 2034
Principal Balance (approx) €158 k
Interest due (approx) €301 k
Total (approx) €459 k

Based on this interest rate, principal and repayment, I calculate the loan will be paid off in 10.5 years (126 Mths)

adcom

Hi OP,

Im a bit confused by your figures. After paying off €50K the principal balnce does not seem to have changed!! (went from 160 to 158).

Looks like the bank manager calculated the 1000e over payment AND the lump sum of 50K together when he was giving the final figures.

There is no way that with the same intrest rate that he could end up paying MORE interest.

I would advise your brother to get on to the PTSB phone and internet banking. They are way more used to working stuff out on the mortgage system than bank managers (trust me, used to work there back in the day!). tell him to ask to speak with a supervisor if he feels the person on the phone isnt giving a good enough answer.
Hope helps! let us know what the result is!!

starbelgrade

adcom wrote: »

Hi OP,

Im a bit confused by your figures. After paying off €50K the principal balnce does not seem to have changed!! (went from 160 to 158).

I never noticed that. Thanks for pointing it out... Something is way off there... I'll keep you posted!