Theoretical question about tracker mortgage

Cavehill Red

Imagine I have a tracker mortgage, originally for say 200K and 30 years.
Now it's five or so years on from when I took it out, and the banks are understandably keen to get trackers off their books.
Say I get a lump sum, from a lotto win, or inheritance, or redundancy or something, about 50K. I decide I want to put that into the mortgage to reduce my monthly payments, but I still want to retain the length of the mortgage.
Would a bank facilitate that, or would they want you to keep repaying at current levels and shorten the term of the loan?
(This is utterly hypothetical, so please don't refer me to the t+c's! I'm asking generally what most Irish banks would be likely to do.)

Cavehill Red

And PTSB facilitate that on trackers too?
What about other Irish banks, does anyone know?

rainbowtrout

Yes, I have a tracker, if I throw in a lump sum (and have done so) it reduces the balance of the mortgage so the repayments are decreased in line with that. There is no penalty on paying a lump sum into a tracker.

On the other hand, I chose after paying in the lump sum to reduce the term of the mortgage bringing the repayments back to what they were before the lump sum was paid in. I could afford the repayments, it meant i get rid of my mortgage sooner and I pay less interest overall.

Cavehill Red

That's very interesting. I appreciate the argument about clearing a mortgage quicker, but some people these days might prefer to ease their cashflow concerns by reducing day-to-day overheads. It's nice to see that at least one Irish bank would be prepared to be flexible over this. I assumed they'd all be looking to wriggle out of trackers by insisting that either the term was reduced or else the borrower switch to a SVR mortgage.

dotsman

Cavehill Red wrote: »

It's nice to see that at least one Irish bank would be prepared to be flexible over this. I assumed they'd all be looking to wriggle out of trackers by insisting that either the term was reduced or else the borrower switch to a SVR mortgage.

Nope, all banks would have zero problem with you doing this. There would be no "wriggling". People do it all the time.

chris85

Banks cannot penalise a lump payment being paid off a variable rate product as part of the consumer credit act. You will generally get the option to reduce the payment or reduce the term.

rainbowtrout

Cavehill Red wrote: »

That's very interesting. I appreciate the argument about clearing a mortgage quicker, but some people these days might prefer to ease their cashflow concerns by reducing day-to-day overheads. It's nice to see that at least one Irish bank would be prepared to be flexible over this. I assumed they'd all be looking to wriggle out of trackers by insisting that either the term was reduced or else the borrower switch to a SVR mortgage.

I would agree. I would do the same if I needed to, it just suited me to keep up the payments by reducing the term.

Banks can't make you reduce the term of the mortgage or penalise you for paying a lump sum into a tracker/variable rate mortgage.

Cavehill Red

Thanks for the replies, everyone. It came up in conversation and none of us knew whether banks would do it or try to avoid it. Nice to know they've no choice in the matter.

Dubhlinner

chris85 wrote: »

Banks cannot penalise a lump payment being paid off a variable rate product as part of the consumer credit act. You will generally get the option to reduce the payment or reduce the term.

Cavehill Red wrote:

Thanks for the replies, everyone. It came up in conversation and none of us knew whether banks would do it or try to avoid it. Nice to know they've no choice in the matter.

I'm not so sure they have to do it

Chris is right they cannot penalise you for lodging anything extra to a variable or tracker, but I don't think that means they must accept reduced payments for the rest of the term. Open to correction though

I don't think there'd be much of a logical case for them to refuse it though. If someone owed me money and was offering that my overriding condern would be that if I refused they would blow the lump sum and then tell me their wages have been reduced and it would be a nightmare trying to get money out of them.