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Considering paying for a lump of tracker mortgage

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    #32
    AlmightyCushion
    Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,059 Mod ✭✭✭✭AlmightyCushion


    TeaBagMania wrote: »
    Exactly, but I wouldn't put it past any financial institution to apply your over payment toward interest unless you specifically specify principal only

    How can they put it against interest though?


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    #33
    TeaBagMania
    Registered Users Posts: 1,192 ✭✭✭TeaBagMania


    SteM wrote: »
    But once you're paying your monthly mortgage repayment you're covering the interest charged that month surely?

    always separate your standard payment from an over payment, they should be two separate transactions
    AlmightyCushion wrote: »
    How can they put it against interest though?

    its laughable but yes, I pay my mortgage online and there is an option to pay extra towards interest, why anyone would actually do that is beyond me


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    #34
    SteM
    Registered Users Posts: 6,599 ✭✭✭SteM


    TeaBagMania wrote: »
    always separate your standard payment from an over payment, they should be two separate transactions

    Sorry but you don't have to do this. The KBC overpayment form specifically says "The additional payments will be deducted from the capital balance and the overpayments can be redrawn at a later date...."

    I overpay with KBC and it is one transaction with the overpayment coming off the principle.


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    #35
    TeaBagMania
    Registered Users Posts: 1,192 ✭✭✭TeaBagMania


    True, you don't "have" to but it protects me from any misunderstandings in the future as that separate overpayment was destine for principal only


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    #36
    mad m
    Registered Users Posts: 9,002 ✭✭✭mad m


    I rang up recently about our tracker. Have ten years left on it at 780 a month. I asked about paying extra off. The guy advised me if I was to change my 780 a month to more and down the line i couldn’t pay it for whatever reason I’m locked into that payment.

    If I just setup a monthly payment to my mortgage on top of what I’m paying is a better option. If I did this with extra payments a month I’d be finished mortgage in 4 years instead of 10. Currently paying 0.75 + ECB rate.

    My thinking of doing this is trying to pay it off quicker if the ECB rate were to rise.


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    #37
    alias no.9
    Registered Users Posts: 6,273 ✭✭✭alias no.9


    SteM wrote: »
    Sorry but you don't have to do this. The KBC overpayment form specifically says "The additional payments will be deducted from the capital balance and the overpayments can be redrawn at a later date...."

    I overpay with KBC and it is one transaction with the overpayment coming off the principle.

    All you have at any given time is a balance outstanding, there aren't separate capital and interest balances, endowment mortgages are a relic of a distant past.

    The only context making a choice to set an additional payment against capital or interest for a run of the mill annuity mortgage would be an offset mortgage arrangement where the overpayment can be withdrawn again at a later date.


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    #38
    Sunrise_Sunset
    Registered Users Posts: 1,211 ✭✭✭Sunrise_Sunset


    Can you overpay with a PTSB tracker mortgage?


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    #39
    flowerific
    Registered Users Posts: 177 ✭✭flowerific


    I'm on an Ulster Bank Tracker and can overpay what ever amount I want and for as long as I want. My thinking of overpaying now is that the interest rates will eventually rise and I'd rather pay off the mortgage sooner while I have the money and a job, incase I lose my job or circumstances change.
    OP I would overpay if you can each month by whatever amount and you still have the rest of the money to do other things with it


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    #40
    danoriordan1402
    Registered Users Posts: 696 ✭✭✭danoriordan1402


    Same here with my UB tracker, I find the web interface they have very good for setting it up and monitoring the balance as well


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    #41
    MrMusician18
    Registered Users Posts: 7,269 ✭✭✭MrMusician18


    If this were me, I'd use it to pay down the mortgage, but not immediately. The tracker rate you're on is advantageous to you and not the bank.

    So if I had the 90k, I'd put in a relatively safe investment, bonds or the like and when the 90k is equal or below the amount you have outstanding, I would pay the mortgage off in full.
    That way you'll still retain total control of your money should an emergency or need arise as well as retaining the option to be mortgage free early. Yes this option has a cost, but you're on a low rate so its not particularly high.


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    #42
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,279 Mod ✭✭✭✭The_Conductor


    AlmightyCushion wrote: »
    How can they put it against interest though?

    With Bank of Ireland its definitely an option- essentially it enters a 'suspense account' from which interest is paid when it comes due- aside from the main mortgage payment- which doesn't feature interest repayments, just standard principal repayments- until such time as the suspense account has been bankrupted- at which point you bounce back up to the regular repayment schedule again.

    Its a bit nutty- and I have no idea why people do it- but apparently, its popular.


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    #43
    tvjunki
    Registered Users Posts: 601 ✭✭✭tvjunki


    Hold onto the funds.....there was a guy on Joe Duffy and he was made redundant. He paid the lump sump off his mortgage from his redundancy payment and could not get a new job for even half of what he was getting. He had 30k left on the mortgage and living on job seekers.
    The bank do not care you paid it off. The bank were in the process of repossessing the house.

    Hold onto the funds if you worry you will spend it then put some away on long term (12months) and keep enough for you to live on for say a year or so. Once you are in stable employment you can the look at options for longer term saving or investment.
    That rate you are on you will never get it again as others have said.

    I also know someone do what you are thinking of doing and their tracker s near to the same as you. I told them not to do it. They now are struggling to get a loan to do work on their home. They are mortgage free but any loan they can get will be 12 % or more.


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    #44
    ghostdancer
    Registered Users Posts: 6,539 ✭✭✭ghostdancer


    assuming you don't have any need to do an extension, upgrade car etc., then using it for a pension is likely to be far more lucrative than overpaying on a 1.68% mortgage loan.
    as already mentioned, max out your pension contributions and offset the payments with some of the 90k.


    your other option of leaving it sitting in an account gathering almost no interest, and paying the mortgage from it, is about the worst thing you can do.


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    #45
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    tvjunki wrote: »

    I also know some do what you are thinking of doing and their tracker s near to the same as you. I told them not to do it. They now are struggling to get a loan to do work on their home. They are mortgage free but any loan they can get will be 12 % or more.

    While I’d agree it’s probably better invest the money (or some of it at least) than paying off a tracker I don’t know why your friends are paying 12% for a loan. There are multiple loan options less than this, KBC have a 6.3% rate available for example.
    ghostdancer wrote: »
    assuming you don't have any need to do an extension, upgrade car etc., then using it for a pension is likely to be far more lucrative than overpaying on a 1.68% mortgage loan.
    as already mentioned, max out your pension contributions and offset the payments with some of the 90k.


    your other option of leaving it sitting in an account gathering almost no interest, and paying the mortgage from it, is about the worst thing you can do.

    Lumping it all into a pension isn’t very wise either imo as you can’t access it for years, along with the fact there are limits on how much you can put in. The best idea imo is to have a combination of adding to the pension, investing and saving. There will be a sweet spot of an amount for putting into your pension which will result in almost no tax being paid on the redundancy I’d aim for that, then invest some of the remainder and keep a decent bit in savings also as you can’t put a price on easy access to money when you need it.


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