Overpay mortgage - Ulster Bank

Beanybabog

I have an Ulster Bank mortgage and in order to overpay I had to call them (can't do it via the App). There were a few options, pay over the phone or transfer myself to an IBAN they gave. I chose to do it myself so I can easily overpay online without calling when I want. My mortgage account now shows the money has come off the total amount due, but I don't know if this will reduce my monthly payment or reduce the term.

Is there a default position? They have two calculators online, one to reduce term and one to reduce monthly payment. The interest saving on reducing the term is higher.

4ensic15

There is nothing to stop you overpaying each month up to the original payment in which case the term will shorten and there will be no additional interest.

mckildare

We were told to write a letter to instruct them to reduce the term so I would guess the default is reducing the payments. They made one mistake where they tried to reduce the payments but that was corrected with a reminder phonecall.

It is possible to make an overpayment via the app, have done it myself a number of times. Set up the UB 'holding' account as a Payee (You can get this from them over the phone). Your mortgage number is the reference. The app stores the reference as default once you make the first one so in general it is a very simple process on the app - select the UB account and transfer the required amount. Check back a few days later to make sure it has gone through as expected.

Luckysasha

Can you see your mortgage account on the app. I have an Ulster bank mortgage but do all my day to day banking with bank of Ireland. I have to wait until my statement comes out every year to see my mortgage transactions. I pay two extra monthly instalments a year. I transfer from my boi account to my Ulster bank mortgage account via my boi app.

The_Conductor

Normal practice is you inform them in writing- which of two options you wish to invoke with your overpayments- namely- a reduction in the term of the mortgage- or a reduction in the mortgage payment due on a monthly basis.

I would have thought that this would setup the default associated with the overpayment automatically- however, if its a periodic overpayment, as opposed to a consistent overpayment- I can see how/why they might need reminders.

Different lenders handle the default manner in which they deal with overpayments in different ways- BOI for example default to a lower monthly payment- rather than a reduction in the mortgage term, when there is a reduction made to the outstanding balance.

Beanybabog

Thanks all. I meant I couldn't make a payment via the app direct into the mortgage account- now that I have the payee account added I can.

If I overpay regularly will it actually matter if I have it set up to reduce the term or amount? Say for example I pay the mortgage amount (as it is now) plus and extra 50% per month in the long term will it be the exact same?

The_Conductor

Beanybabog wrote: »

Thanks all. I meant I couldn't make a payment via the app direct into the mortgage account- now that I have the payee account added I can.

If I overpay regularly will it actually matter if I have it set up to reduce the term or amount? Say for example I pay the mortgage amount (as it is now) plus and extra 50% per month in the long term will it be the exact same?

Net result is the same- however, if you don't specify that the term be reduced- and simply reduce the principle- it means if you ever need the extra leeway in your life- you can simply pay the lower amount, and not have to worry one jot about it. If you are going to be consistently making an overpayment- its not going to really matter- because you'll end up at the same point- that being you'll have paid off the principle early- however- you could effectively be formally turning your mortgage into a shorter term mortgage- as opposed to making informal infrequent overpayments- which may not be your intention.

From a practical point of view- I'd suggest that making unofficial overpayments into the account- is the way to go- if you have the leeway to do so- as you're not going to hobble yourself if you don't have the extra funds at some stage?

Beanybabog

Thanks. That's what I was thinking- reduce the monthly payment. We have quite a large mortgage but can easily afford it and extra now, but that may not always be the case! I'd prefer to lower the monthly payment first. However when I used the calculator to work out the lump I put on, the interest saved on the reduce the term option was substantially more than on the reduce the payment option. However I think if I consistently overpay that might be irrelevant?