Mortgage Advice

spark23

The situation; currently have a mortgage of 1200 euro a month, my father is the guarantour, in dec 2013 hope to make a lump some payment off the loan of 25000-30000 (should have about 180000 remaining then) to reduce the monthly payments and remove my father from the mortgage as our combined mortgage protection is 100 euro due to his age versus about 15 euro if i were on my own. My concern is would i be changing the terms of the loan and would this cause me to lose my tracker? Any ideas thanks...

NIMAN

If you have a tracker, can you make lump sum payments to it?

I always thought you could only make payments to variable mortgages. Might be wrong of course.

spark23

NIMAN wrote: »

If you have a tracker, can you make lump sum payments to it?

I always thought you could only make payments to variable mortgages. Might be wrong of course.

On my one had the option of paying either lump sum to reduce years or monthly amount

NIMAN

Well if you had that option then surely you shouldn't lose your tracker?

spark23

NIMAN wrote: »

Well if you had that option then surely you shouldn't lose your tracker?

The problem is I got my mortgage with my dad so worries if I try to remove him ill have a new mortgage as such as in need to reapply for one and I'm on a lot less now so worried as too whether I'd qualify or not

The_Conductor

In cases like this when a guarantor is being removed, the lender can change the terms of the mortgage (most often by increasing the tracker spread), they cannot however take your tracker off you.

Aka- you could end up paying ECB baserate + 1.5% where you're now paying baserate + 1%- in recognition of the increased risk associated with you as a sole holder of the mortgage- the original rate will have been calculated on your fathers means, alongside yours, and now, the terms can be varied.

Normally with a lumpsum payment- you get to choose either a lower monthly repayment, or a shortening of the term of the mortgage- this is normally your choice.

Ask what the implications of having your father as guarantor might be. The lumpsum payment on the mortgage can be used to support your application- however it is a separate transaction.

killers1

NIMAN wrote: »

If you have a tracker, can you make lump sum payments to it?

I always thought you could only make payments to variable mortgages. Might be wrong of course.

A tracker mortgage is a variable rate mortgage as it tracks the ECB rate and increases/decreases in line with ECB rate changes. There's no such thing as a 'Fixed Tracker rate' only a fixed margin above ECB

Penny Dreadful

When I bought my house my Dad was acting as guarantor for me and I had to pay his life insurance. Like you OP this was pretty high given his age and I was anxious to get rid of this payment if possible.
A year or two into the mortgage I got a new job with a higher salary and asked the bank about taking him off and they did that with no problems at all. I wasn't on a tracker but a fixed rate.

spark23

Thanks for the info a few things to enquire about alright

smcgiff

Might be worth considering putting your lump sum into a deposit account, you might be able to get more interest from savings than you would get a reduction in the reduced mortgage finance costs - considering you are on a tracker.

tony81

smcgiff wrote: »

Might be worth considering putting your lump sum into a deposit account, you might be able to get more interest from savings than you would get a reduction in the reduced mortgage finance costs - considering you are on a tracker.

+1 to this.

What's your tracker rate? Didn't PTSB recently have a scheme that actually paid you to pay off your tracker mortgage early? I wonder will this scheme come around again.

Make sure there are no adverse conditions associated with early repayment or removal of guarantor (get your solicitor to read over the agreement and original contract). The bank will be only too happy that you are paying off a lumpsum & shouldn't try to penalise you for it.

spark23

its .93 i always had the option of paying a lump sum to reduce term or monthly amount, plan was always to remove the guarantor but my wages fell significantly in the last four years, im holding out for some sort of deal tbh cause dont want to save the bank money either

The_Conductor

spark23 wrote: »

its .93 i always had the option of paying a lump sum to reduce term or monthly amount, plan was always to remove the guarantor but my wages fell significantly in the last four years, im holding out for some sort of deal tbh cause dont want to save the bank money either

Just wondering what you have in mind when you say you're holding out for some sort of deal? The only proposals on the table are in relation to delinquent mortgages- and solely for those who cannot afford to pay, as opposed to those who elect not to pay. What do you think may be coming down the road?

tony81

smccarrick wrote: »

Just wondering what you have in mind when you say you're holding out for some sort of deal? The only proposals on the table are in relation to delinquent mortgages- and solely for those who cannot afford to pay, as opposed to those who elect not to pay. What do you think may be coming down the road?

E.g. ptsb last year.. 10% bonus payments to mortgage holders who pay lump sums off their borrowings. The mortgage holder must make the additional payments in lump sum multiples of €5,000 and the lump sum payments cannot exceed more than 50% of the balance outstanding on the mortgage.

david.1976

Quick question for anyone who knows - curently on tracker type mortgage with bank of scotland. pay circa 1000 Euro a month. head recently that by paying your mortgage on a WEEKLY basis that you can substancially reduce the overall cost of the morgage as it reduces the interest due. Is this true??

Citizenpain

david.1976 wrote: »

Quick question for anyone who knows - curently on tracker type mortgage with bank of scotland. pay circa 1000 Euro a month. head recently that by paying your mortgage on a WEEKLY basis that you can substancially reduce the overall cost of the morgage as it reduces the interest due. Is this true??

Put "pay mortgage fortnightly" into the search engine

Morleystreet

If mortgage interest rate is higher than savings deposit rate then it can make sense to pay a lump sum off mortgage and reduce the term.

Just wondering if anyone has any thoughts on the effect of inflation though?
With the new Irish debt 'deal', the inflation effect seems to get mentioned as effectively reducing the country's debt?? Ie if term is increased from 20 yrs to 40 yrs then inflation is your friend in that the payments in later yrs are effectively small due to inflation. If that logic holds true?, then should that also be taken into account in making a lump sum payment on your mortgage. Ie the final few yrs payments will be small (due to inflation) so what is the point in reducing these yrs off your mortgage term by paying a lump sum now.
Anyone know how to work this into one's calculations ?

roro2

Interest compensates lenders for inflation. Regarding the Irish agreement - yes, the principal payments will effectively be smaller if inflation is higher. But if inflation is higher, interest rates will also be higher, and therefore the interest that's payable in the interim will be higher and payable over a longer period (especially in this case, as the new bonds will be variable rate). This argument is being used to exaggerate the benefits of the deal.

Similarly with your mortgage, higher inflation (if accompanied by higher earnings) will effectively reduce the real level of principal, but interest rates would also move higher in this scenario (even for Trackers). If you repay some of your principal you will be reducing the interest you pay over the whole life of the mortgage - that is the key benefit. The only way that you gain in a real sense is if inflation is higher than your mortgage interest rate over the life of the mortgage.

Ritchi

david.1976 wrote: »

Quick question for anyone who knows - curently on tracker type mortgage with bank of scotland. pay circa 1000 Euro a month. head recently that by paying your mortgage on a WEEKLY basis that you can substancially reduce the overall cost of the morgage as it reduces the interest due. Is this true??

It does reduce it for two reasons. Firstly if you're doing it weekly or bi-weekly, you're making extra payments in the year, you make 13 monthly payments.

Also, as interest is charged daily on a mortgage, you're giving it less of a chance to generate interest payable. If you pay monthly, you'll have a full months interest, if you do it bi-weekly, the first period will be the same as if you were monthly(divided by two), but the second bi-weekly payment will hav its interest calculation based on a smaller amount.

There's a quick calculator on this page: http://www.free-online-calculator-use.com/biweekly-loan-payment-calculator.html and I'm sure there's more about.

Morleystreet

roro2 wrote: »

Interest compensates lenders for inflation. Regarding the Irish agreement - yes, the principal payments will effectively be smaller if inflation is higher. But if inflation is higher, interest rates will also be higher, and therefore the interest that's payable in the interim will be higher and payable over a longer period (especially in this case, as the new bonds will be variable rate). This argument is being used to exaggerate the benefits of the deal.

Similarly with your mortgage, higher inflation (if accompanied by higher earnings) will effectively reduce the real level of principal, but interest rates would also move higher in this scenario (even for Trackers). If you repay some of your principal you will be reducing the interest you pay over the whole life of the mortgage - that is the key benefit. The only way that you gain in a real sense is if inflation is higher than your mortgage interest rate over the life of the mortgage.

Cheers roro2

That's the bit I was missing, that as inflation rises (and hopefully salary!) then interest rates will likely rise too. That makes sense - thanks for reply.