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03-10-2020, 19:14   #1
jayjay2010
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Mortgage overpayment, installment reduced

Hi all. I recently made a lump sum payment of approx €1500 into my mortgage, with instructions to pay down the principal and reduce term. However, today I noticed that my monthly installment has reduced by €0.24. I know this is a very small amount, but shouldn’t my monthly installments remain the same? All I wanted to do was to reduce the term and keep payments the same.
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03-10-2020, 19:27   #2
cronos
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Originally Posted by jayjay2010 View Post
Hi all. I recently made a lump sum payment of approx €1500 into my mortgage, with instructions to pay down the principal and reduce term. However, today I noticed that my monthly installment has reduced by €0.24. I know this is a very small amount, but shouldn’t my monthly installments remain the same? All I wanted to do was to reduce the term and keep payments the same.
When I did this with AIB it happened like you describe as it was a variable. I'd imagine it's standard enough to do it that way to be honest.

If you eventually get enough to pay the full principle down early then it won't really make a difference I would have thought.
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03-10-2020, 21:46   #3
Fiona44
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Sounds like they reduced the monthly payments instead of paying down the principal. Same thing happened to me more than once - a phone call to the bank sorted it out.
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03-10-2020, 21:52   #4
collie0708
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I used to make several lump principle payments and its common enough for your payment to change by very small amounts to ensure your future payments are the same amount for the rest of the life of the loan.
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03-10-2020, 21:55   #5
Darc19
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Sounds like they reduced the monthly payments instead of paying down the principal. Same thing happened to me more than once - a phone call to the bank sorted it out.
It would need to be a 500+ year mortgage for that calculation to work
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04-10-2020, 11:51   #6
tommythecat
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It's would be a reduction of around 10 euro off the repayment if they reduced it. That's a very small sum so it looks like something else. For example I pay 500 overpayment monthly avd it reduces the payment by around 3 euro for a 280k mortgage.
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04-10-2020, 15:30   #7
Claw Hammer
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Quote:
Originally Posted by jayjay2010 View Post
Hi all. I recently made a lump sum payment of approx €1500 into my mortgage, with instructions to pay down the principal and reduce term. However, today I noticed that my monthly installment has reduced by €0.24. I know this is a very small amount, but shouldn’t my monthly installments remain the same? All I wanted to do was to reduce the term and keep payments the same.
Unless you have agreed with your bank, the monthly payments will reduce rather than the term being shortened. The banks have computerised algorithms which adjust the repayment so as to ensure it will be paid off on the final day of the mortgage term. Mathematically it makes little or no difference which way it is done. You can use the monthly saving to make further lump sum payments and eventually the mortgage will be paid off early anyway.
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05-10-2020, 13:07   #8
pwurple
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The couple of cent difference is because they made it a month or two full payments shorter at the end of the term, then they split the rest and adjust for the interest. Normal calculation and nothing to worry about.

Sometimes it happens the other way around as well, say if I ask for an overpayment of 200 euro extra per month, to work it out to an even number of payments over the whole term, it ends up as 199.45 more per month instead.
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