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Pay money off mortgage term?

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    #62
    NIMAN
    Registered Users Posts: 33,028 ✭✭✭✭NIMAN


    This is the form I use for AIB overpayments.

    http://www.aib.ie/servlet/BlobServer?blobcol=urldata&blobtable=MungoBlobs&csblobid=1214417763172&blobkey=id&blobwhere=1214417763172&blobheader=application%2Fpdf


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    #63
    Claw Hammer
    Registered Users Posts: 6,163 ✭✭✭Claw Hammer


    pasquale83 wrote: »

    Also option C. I can choose the new term but who tells me the amount of overpayment needed??


    Thanks!

    An excel spreadshet and a few formulae will soon tell you all you need to know.


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    #64
    phormium
    Registered Users Posts: 3,295 ✭✭✭phormium


    To answer a query back on post 57 there are no new offset type mortgages available here now. There were several back in the boom, First Active having the best in my opinion which was originally called a current account mortgage and then changed to offset mortgage.

    National Irish also had a version of it as did PTSB.

    Lost of the old FA (now UB) ones still around and a major plus with them is that they can be transferred to a new property thus bringing your valuable tracker with you.


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    #65
    etoughguy
    Closed Accounts Posts: 344 ✭✭etoughguy


    There are tons of websites on the should I pay down the mortgage versus use that money for investing etc..
    Depends on your own situation entirely, do you have an emergency fund in place etc

    Personally I'm of the all debts are evil mentality and have overpaid for years and don't regret it one bit


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    #66
    NIMAN
    Registered Users Posts: 33,028 ✭✭✭✭NIMAN


    We have overpaid because the mortgage rate was 4%, whereas we'd never get 4% currently with saving money. When you check your mortgage account and see the interest going on every quarter its a pain. For every 4 payments you make, only 3 were working for you, with the 4th going to interest.

    Also there is the psychological thing about getting closer to being mortgage free, that's big in my mind.

    But of course if you can earn more in savings interest than your mortgage interest rate, then it would make financial sense to save the money, take the improved interest and pay off your mortgage later.

    You also have to way up either a smaller mortgage amount v the cushion of having savings or rainy day money. No point putting every single cent you have saved against the mortgage so that if something comes up in an emergency then you can't afford to pay for it.


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    #67
    pasquale83
    Registered Users Posts: 477 ✭✭pasquale83


    cart man wrote: »
    With Option A you determine by how much you want to overpay, so if interest rates change the amount you overpay stays the same.
    In addition to the review, With option B you state what is the total amount you pay, if interest rates changed once the new amount is less than your repayments then your repayment stays the same
    Both options work as I had previously outlined. Even if you take out the overpayments in a couple of years your term will reduce as the interest charged whilst overpaying was less so your payments covered an amount of the principle.

    Yeah, that should be true and I agree with you. But:

    - overpaying monthly, is less effective than a lump sum. So maybe is better to put a lump sum rather than regularly overpaying?
    - why the form states that the term will not reduce? Or in option B it will reduce only if I overpay till the extinction of the mortgage?


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    #68
    pasquale83
    Registered Users Posts: 477 ✭✭pasquale83


    Claw Hammer wrote: »
    An excel spreadshet and a few formulae will soon tell you all you need to know.

    Yeah, I know and I have it. But I would like things to work differently. I mean: if I overpay for one year and then I stop they told me that the term will not reduce? why this? whit my excel spreadsheet I simulated it and for one year of overpayment it should reduce by almost 2 years. But they say that it will not be like that choosing option A or B. I want to have maximum flexibility, so I wanna have the possibility to withdraw overpayments in case I need and at the same time reduce the term if I leave them there. but this is not an option according to the form.


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    #69
    AlmightyCushion
    Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,049 Mod ✭✭✭✭AlmightyCushion


    pasquale83 wrote: »
    Yeah, that should be true and I agree with you. But:

    - overpaying monthly, is less effective than a lump sum. So maybe is better to put a lump sum rather than regularly overpaying?
    - why the form states that the term will not reduce? Or in option B it will reduce only if I overpay till the extinction of the mortgage?

    Overpaying monthly is more effective. If you pay off €100 every month you will save more in interest than saving up that €100 every month and paying off €1200 after a year.


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    #70
    pasquale83
    Registered Users Posts: 477 ✭✭pasquale83


    AlmightyCushion wrote: »
    Overpaying monthly is more effective. If you pay off €100 every month you will save more in interest than saving up that €100 every month and paying off €1200 after a year.

    I agree. but I already have savings, so no need to save to build it. I am just trying to find to get the best from my money.


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    #71
    cart man
    Registered Users Posts: 286 ✭✭cart man


    pasquale83 wrote: »
    Yeah, that should be true and I agree with you. But:

    - overpaying monthly, is less effective than a lump sum. So maybe is better to put a lump sum rather than regularly overpaying?
    - why the form states that the term will not reduce? Or in option B it will reduce only if I overpay till the extinction of the mortgage?

    From the notice:
    "Although the term of your mortgage will not be reduced. If left in place for the full term of the loan this credit will effectively redeem'your mortgage at an earlier date."

    What I would read into this is that it is still based over the amount of years you have left on your mortgage but in actual practice at some stage before that time you will have repaid the mortgage in full and thus it will cease.


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    #72
    pasquale83
    Registered Users Posts: 477 ✭✭pasquale83


    cart man wrote: »
    From the notice:
    "Although the term of your mortgage will not be reduced. If left in place for the full term of the loan this credit will effectively redeem'your mortgage at an earlier date."

    What I would read into this is that it is still based over the amount of years you have left on your mortgage but in actual practice at some stage before that time you will have repaid the mortgage in full and thus it will cease.

    Yes, but they say "in place for the full term". What I want to say is that it will reduce the term, by less of course, also if I overpay for only one year for example. But they clearly state in the notice and also verbally at the phone that it doesn't work like that and I don't understand why...maybe they will change the monthly repayment? Something has to change if I overpay for a limited period and I don't request money back and the only two thing that can change are the monthly repayment and the term. So if it is not one should be the other!


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    #73
    AlmightyCushion
    Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,049 Mod ✭✭✭✭AlmightyCushion


    If you over pay they will reduce the monthly mortgage payment hence why the length of t he mortgage doesn't change. If you keep your repayments at the same level they were before you will continue to over pay and you will post off the mortgage sooner.


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    #74
    Lenny
    Moderators, Music Moderators, Recreation & Hobbies Moderators Posts: 9,389 Mod ✭✭✭✭Lenny


    If you over pay it does reduce the payments, I borrowed 206k, it was 35 year, when there was about 34 year left on it, highered the payments to 1740p/m and I then got a letter of my recalculated payments and I had reduced the term to 11.5 years or so. This was with aib, and I can change the payments as often as I want.. Just have to send a letter


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    #75
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭4ensic15


    pasquale83 wrote: »
    Yes, but they say "in place for the full term". What I want to say is that it will reduce the term, by less of course, also if I overpay for only one year for example. But they clearly state in the notice and also verbally at the phone that it doesn't work like that and I don't understand why...maybe they will change the monthly repayment? Something has to change if I overpay for a limited period and I don't request money back and the only two thing that can change are the monthly repayment and the term. So if it is not one should be the other!

    If you pay down the mortgage and shorten the term well and good. If you pay down the mortgage and then want to withdraw the overpaid amount only two things can happen. the repayment amount must go up or the mortgage term must lengthen or indeed some combination of the two.
    If you cant afford higher repayments then the only option is a longer term. Therein lies the problem.
    The bank can't forecast the cost of money to itself at the time of the withdrawal, since they don't know when you will do it nor what the money market conditions will be like when they do.


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