payment into mortgage

papa123

hi,
i am looking for an advice on an issue that has been on my mind since a year but am not finding any answer to.
I have a mortgage and the monthly repayments is taking a whole lump some off my salary each month. i have a saving of about a 100K that i want to put into my mortgage so that the monthly repayments would come down to an affordable level. with the current situation our country is going through, alot of my friends are of the view that i should hold on to the money, while i am feeling that the monthly repayments is almost breaking my back. also i must mention that, like most of us, my house is in a negative equity. its price is almost half of what i bought it for.
would someone who would know more about the mortgage/economic situation , please suggest as to what would be a good idea.

thanks
papa123

Sleepy

I'd talk to the bank tbh. They can tell you what impact such a payment would have on your mortgage, whether it would change the conditions of your mortgage e.g. if you're currently on a tracker / low fixed-rate would it effect this? If so, the lump sum might be better deposited in a savings account where it's interest rate would be higher than the interest charged on your mortgage.

Don't agree to anything on the spot but let them provide some details for your options and take them away for a good think.

jester77

If you are getting more interest on your savings than you are paying on your mortgage then there is not much point. But if it's the other way around then it would be worth investigating your options.

jased10s

pay 80k off and save 20k for the unknown.

Gumbo

jased10s wrote: »

pay 80k off and save 20k for the unknown.

I would be doing something like this myself if i had 100k.

Also if you have a tracker, your bank is losing money on you so approach them to negeoiate a payment.

example :

you owe bank 200k on a tracker mortgage.
Ask them to write off 100k from the mortgage if you pay 80k cash, you have nothing to lose here.

Ryan T

Just paid off a mortgage today with a lump sum. I was on a tracker and there were absolutely no negotiations with the bank. They wanted every cent ( and an admin charge of €39 !!! ) . However it was necessary to pay off this mortgage in my case. My circumstances and the OPs circumstances may well be very different.

Gumbo

Ryan T wrote: »

Just paid off a mortgage today with a lump sum. I was on a tracker and there were absolutely no negotiations with the bank. They wanted every cent ( and an admin charge of €39 !!! ) . However it was necessary to pay off this mortgage in my case. My circumstances and the OPs circumstances may well be very different.

Curious, which bank?
If you dont want to say, no probs.

papa123

i forgot to mention earlier, i have a variable mortgage, not tracker. would that change anything?.some of the replies im getting are for tracker mortgage. i really appreciate all the replies. they are really helping me in making up my mind.

"Also if you have a tracker, your bank is losing money on you so approach them to negeoiate a payment"

Kceire..can u please explain the above and would that still apply to my case?.

Ryan T

UB

Gumbo

papa123 wrote: »

i forgot to mention earlier, i have a variable mortgage, not tracker. would that change anything?.some of the replies im getting are for tracker mortgage. i really appreciate all the replies. they are really helping me in making up my mind.

If you were on a fixed rate you would have to pay an admin charge for the bank to process you payment. Variable rate mortgages are different i believe as in you can pay a lump sum when you want, and trackers are the same.

Ive a tracker with Bank Of Scotland and i can pay lump sums anytime i want without penalty or admin charges.

papa123 wrote: »

"Also if you have a tracker, your bank is losing money on you so approach them to negeoiate a payment"

Kceire..can u please explain the above and would that still apply to my case?.

Probably not in your case as the banks have increased the variable rates on their mortgages. Basically a tracker mortgage was borrowed by the bank at 5%, then given to you at 5% + 1%, so 6%.

Now because of the ECB drpping so low, to 1%, you are only paying 2% on your mortgage but the bank borrowed it at 5% so losing money. It would be in their, and your interest to get the capital as low as possible so the bank lose less on you and you pay less overall.

Some banks are willing to do a deal with customers on trackers by giving them X amount above any lump sum payments, although you dont hear this being publically broadcast.

*Note* figures above are for explanation purposes only, may not reflect what you actually borrowed etc etc

MadsL

papa123 wrote: »

hi,
i am looking for an advice on an issue that has been on my mind since a year but am not finding any answer to.
I have a mortgage and the monthly repayments is taking a whole lump some off my salary each month. i have a saving of about a 100K that i want to put into my mortgage so that the monthly repayments would come down to an affordable level. with the current situation our country is going through, alot of my friends are of the view that i should hold on to the money, while i am feeling that the monthly repayments is almost breaking my back. also i must mention that, like most of us, my house is in a negative equity. its price is almost half of what i bought it for.
would someone who would know more about the mortgage/economic situation , please suggest as to what would be a good idea.

thanks
papa123

How much equity do you have already invested in the house? If you have any thought that you might be in a position to throw the keys back (emigrating permanently, or have job instability) I would be very loathe to throw 100k into a negative equity house. 100k will get you nicely set up without that millstone round your neck.

Simply put, would you 'burn' 30k you would never see again to hold on to your 100k.

Sounds harsh, but if the neg equity is in the order of 40% or so, I'd be damned if I'd throw another 100k at it. Well done on not buying a second 'buy to let' as well with that level of savings.

Some banks are willing to do a deal with customers on trackers by giving them X amount above any lump sum payments, although you dont hear this being publically broadcast.

On a tracker I'd be trying to do a short-sale (negotiate with the bank a price to end the arrangement/clear the mortgage and try and sell the house for that amount; get out with a 40-50k loss or so)

Gareth2011

Ryan T wrote: »

Just paid off a mortgage today with a lump sum. I was on a tracker and there were absolutely no negotiations with the bank. They wanted every cent ( and an admin charge of €39 !!! ) . However it was necessary to pay off this mortgage in my case. My circumstances and the OPs circumstances may well be very different.

Congradulations

lmimmfn

papa123 wrote: »

hi,
i am looking for an advice on an issue that has been on my mind since a year but am not finding any answer to.
I have a mortgage and the monthly repayments is taking a whole lump some off my salary each month. i have a saving of about a 100K that i want to put into my mortgage so that the monthly repayments would come down to an affordable level. with the current situation our country is going through, alot of my friends are of the view that i should hold on to the money, while i am feeling that the monthly repayments is almost breaking my back. also i must mention that, like most of us, my house is in a negative equity. its price is almost half of what i bought it for.
would someone who would know more about the mortgage/economic situation , please suggest as to what would be a good idea.

thanks
papa123

have you worked out how much it will save you in monthly repayments? like others have said i would never throw the full 100k at it, you dont know whats around the corner, as was said putting 80k towards the mortgage would be a better option. In the current climate( fed up hearing that lol ), its extremely difficult to save, and a 20k buffer would easily cover you if you have a family.

What rate are you paying? if its high would the 100k or 80k take you out of negative equity and allow you to move the mortgage to another bank with a lower interest rate?
Also are you receiving mortgage interest relief? did you buy before 2008?

You're going to get squeezed more and more in the next few budgets, so if it relieves some of the stress, go for it, nothings more important than your health.
If you do do it though, i would recommend you bank as much as you can in the next few years with having a lower mortgage, and try and pay the damn thing early if the government allows us to keep any money to ourselves in a few years . Taxes/charges/vat will all get worse in the next few years, its very important to not be living month to month.

Ryan T wrote: »

Just paid off a mortgage today with a lump sum. I was on a tracker and there were absolutely no negotiations with the bank. They wanted every cent ( and an admin charge of €39 !!! ) . However it was necessary to pay off this mortgage in my case. My circumstances and the OPs circumstances may well be very different.

Can i ask why? if it was a decent tracker you could earn more interest in the bank with the lump sum than the tracker interest costs, i.e. if tracker was ECB + 2.5%, i.e. 3% you can get 4% at the post office with national bonds.

okiss

I can understand that you want to pay off a €100k off your mortgage to bring down the payments but you need to think long term with this.
If you pay this €100k you have no savings and you don't know what will happen in the future.
I would ask you bank for the following information what would happen if you were to pay €30k, €40k or €50k off the principal of you mortgage and get the figure you would be paying each month in this case.
I would then go to an independent financial advisor and explain you situation to them. When you make an appointment they will ask you to bring further information with you in order to asses your financial situation.
You will pay them a fee of apox €200 to €300 to them and will give you independent financial advice in regards to your mortgage, savings ect
Your bank will tell you what will suit them and this may not be the best for you. I have heard John Lowe who is known as the money doctor on Newstalk. He is an independent financial advisor and has a number of years experience in this area. I know some people who have done this and found they saved money in the long run.

Lantus

As well as any infomal advice gven here I'd be very tempted to get some 'real' financial advice given the huge amount of money involved.

As to whether to pay of it depends on what is left on the mortgage and the current market value of the house, where it is and what it is. A house that you have a mortgage for 300k on, bought for 310k and is now worth 160k. even if you throw every cent at it you are still 40k in -ve equity and the bank still owns it. How many years are left on the mortgage term? Whats the interest rate? Most of the interest is paid during the first third of a mortgage when it's nearly all interest and very little capital being paid off.

a 3 bed or 4 bed is a better long term bet than an apartment or 2 bed house as familes will want and need space to grow.

Theres no harm in asking the bank a few what if's for paying off a sum early and the effect on re-payments. though.

bb12

keep the 100k cash. that's real money in your pocket. chuck the keys in the letterbox and head off to a distant land and make a fresh new start!

you would be totally mad to put that real money in a negative equity house!

papa123

okiss wrote: »

r you. I have heard John Lowe who is known as the money doctor on Newstalk. He is an independent financial advisor and has a number of years experience in this area. I know some people who have done this and found they saved money in the long run.

sent an email to john lowe and asked for an appointment...thanks for the info

papa123

lmimmfn wrote: »

have you worked out how much it will save you in monthly repayments?
What rate are you paying? if its high would the 100k or 80k take you out of negative equity and allow you to move the mortgage to another bank with a lower interest rate?
Also are you receiving mortgage interest relief? did you buy before 2008?

in terms of monthly repayments its going to save me 600 euro pm i.e my repayments will come down to 2000 pm from 2600pm.

in terms of rate, its 3.6% and NO the 100k will not take me out of -ve equity it will still be 40k to 50k short.

papa123

kceire wrote: »

Basically a tracker mortgage was borrowed by the bank at 5%, then given to you at 5% + 1%, so 6%.

Now because of the ECB drpping so low, to 1%, you are only paying 2% on your mortgage but the bank borrowed it at 5% so losing money. It would be in their, and your interest to get the capital as low as possible so the bank lose less on you and you pay less overall.

Some banks are willing to do a deal with customers on trackers by giving them X amount above any lump sum payments, although you dont hear this being publically broadcast.

*Note* figures above are for explanation purposes only, may not reflect what you actually borrowed etc etc

thank you kceire, very well explained.

uberwolf

kceire wrote: »

Ive a tracker with Bank Of Scotland and i can pay lump sums anytime i want without penalty or admin charges.

I rang and was told different. :mad: