Mortgage Payment Options

intothewest

Hi..just put up a post about savings and best options. Our biggest outgoing at the moment is our mortgage (followed closely by childcare but that’s short term!) and I am keen to try and put more towards this, or have it paid off quicker…as do we all I know. I’m recluctant to talk to the bank about it, as I just feel they will tell me options where they will still get the most of us. We are are on a variable term with AIB, 35 years. We could now afford to pay off more per month than is required. Question is, do we just pay more into our mortgage a/c by DD every month, or can we look at getting the term reduced from 35 years to 20/25years? Or does getting the term reduced incur possible charges? I’m so clueless when it comes to these things, I really need someone to spell it out to me in plain English!

killers1

intothewest wrote: »

Hi..just put up a post about savings and best options. Our biggest outgoing at the moment is our mortgage (followed closely by childcare but that’s short term!) and I am keen to try and put more towards this, or have it paid off quicker…as do we all I know. I’m recluctant to talk to the bank about it, as I just feel they will tell me options where they will still get the most of us. We are are on a variable term with AIB, 35 years. We could now afford to pay off more per month than is required. Question is, do we just pay more into our mortgage a/c by DD every month, or can we look at getting the term reduced from 35 years to 20/25years? Or does getting the term reduced incur possible charges? I’m so clueless when it comes to these things, I really need someone to spell it out to me in plain English!

It's very straightforward. You can either tell AIB to increase your monthly DD to €X amount or you can ask them to reduce the term to X number of years. Either way there is no penalty or charges because you are on a variable rate. You will always have the option of reverting to the original term if circumstances change and you need that extra cash for some other purpose. I'd be inclined to decide what you can afford and ask them to increase the repayment to that amount and see how you go. You can always increase/decrease further down the road. You're automatically reducing the term in either case...

opinionated3

Hi op. I am thinking of doing the exact same thing. I have roughly 80 _ 100 spare at the end of the month (prior to next Wednesday of course!!). I have 23 years left on my mortgage with roughly 130000 of a balance left to pay. Does anyone know of an online calculator that could let me know what impact this extra payment would have? I am on variable rate at present

NIMAN

Also on a SVR mortgage with AIB, and have made a few overpayments to the account. This is when you save maybe €1k or €2k, then send it to them in a cheque and tell them to take it off your capital on your mortgage. You have the option of it coming off and reducing your monthly amount to be paid or else keep the monthly amount the same and reduce the years left. There is a form on their website that you can print out, tick the relevant box and send off to them with the cheque.

Also, recently I contacted them and asked them to take my mortgage payment every fortnight instead of monthly, as it suited us better. Again this was not a problem for them. Also got them to stick an extra €50 approx on to each fortnightly payment as we also are able to afford this for now. This way we are sort of overpaying each fortnight and so the interest paid will be reduced long term.

Any more questions feel free to ask.

intothewest

Thanks everyone. Opinionated3, there is a calculator online that you can use..it’s the Karl Jeacle calculator. It actually is a bit sickening to see how much interest you are paying if you stay as you are, so it’s good motivation to try and pay off as much as you can in the short term. Niman, I think my preference is to reduce the number of years on it, because then we can also change it again if we need to. I don’t want to tar them all with the same brush, but somehow I don’t fully trust that they would take extra payments off the capital only and not the capital+interest…plus, I think I would be mentally happier knowing that my mortgage is now over just 15yrs rather than 30!

NIMAN

Opinionated3, 23yrs left on a 130k balance is a long time, for what is a relatively small mortgage by todays standards.

Could you afford to maybe ask your bank to restructure it to say 15yrs and pay extra monthly, or does your monthly repayment amount suit you as it is?

My mortgage was taken out for 15yrs two years ago, and its now down to under 10yrs by making some overpayments. Its good to see light at the end of the tunnel once you are in single figures for years left.

opinionated3

NIMAN wrote: »

Opinionated3, 23yrs left on a 130k balance is a long time, for what is a relatively small mortgage by todays standards.

Could you afford to maybe ask your bank to restructure it to say 15yrs and pay extra monthly, or does your monthly repayment amount suit you as it is?

My mortgage was taken out for 15yrs two years ago, and its now down to under 10yrs by making some overpayments. Its good to see light at the end of the tunnel once you are in single figures for years left.

Thanks niman. Yeah i think we are happy with the current repayments cos we have other loans as well unfortunately. I think though i will arrange an extra €100 dd each month with my bank with the objective of reducing the term. Do you think this would have much impact on the length of the term

NIMAN

Off top of my head not sure, but iirc that mortgage calculator allows the option to add in extra payments each month/year, and that should show you how much this would save.

ChainWhip

Anything you pay into a mortgage, above and beyond your monthly P&I payment, sits as a credit on your account and so the monthly interest is calculated on a reduced capital amount. This is even without filling in the forms to actually 'see' it coming off the mortgage.

If you have spare cash now, definitely start chipping away at the capital. As mentioned earlier you'll reep the interest benefits in the long term.