Mortgage Overpayments - Reduced Term or Repayment?

Ta me anseo

Hi folks!

Just a quick question:

We've been regularly overpaying on our mortgage for a while now and have more or less cut our original term in half as a result. Obviously in this case, our basic repayment has remained the same and we simply add our extra payment on top of this.

My question is, is it possible in this country to have the monthly repayment reduce instead of the term when you overpay? And if so, how much of a difference is there likely to be? We're overpaying by 500 euro on a mortgage of 1400 at the moment. How much would the basic repayment be reduced by in this case?

Just asking cos we're thinking of upgrading and I would be more interested in protecting our ability to repay if we get into trouble than reducing the term since our mortgage would be much bigger......

Thanks!

TheDriver

I'm sure a mortgage can be re evaluated at any time with regards amount owed, term of mortgage etc

homer911

To answer that question we would need to know the original mortgage value, date taken out, interest rate, original term, for how long you have been overpaying...

Far easier for you to just pop the numbers into a spreadsheet..

Ta me anseo

I suppose the actual details aren't really that relevant. I'll rephrase my original question so you can see what I'm asking.

Also, I can find amortisation tales for loans which tell you how the term reduces with overpayments for Option 1 below, but none that will show how your payments might be affected for Option 2 below.

It would all be irrelevant if no Irish banks give you the option anyway!!

Option 1 (we are currently doing this) :

Mortgage of 230,000 over 25 years with a repayment of 1,400 euro a month.

Overpaying by 500 euro each month will reduce the term by 10 years or so. Effectively it means that our minimum repayment will always be 1,400 but each extra 500 euro takes a week or two off the term so we repay the whole thing early, but pay 1,900 every single month until finish.


Option 2 (do Irish banks give this option? - Other countries do) :

Mortgage of 230,000 over 25 years with a repayment of 1,400 euro a month.

Term remains at 25 years but overpaying by 500 euro each month reduces the minimum repayment due. I don't know the numbers but perhaps each 500 euro takes 2 euro off the repayment or something like that so that after five years our minimum repayment is down to 1,250 euro. This way, we still repay for 25 years but both our actual and minimum repayments fall each month:

First month 1,900 euro (1,400 minimum + 500 overpayment)
Second month 1,898 euro (1,398 minimum + 500 overpayment)
.
.
.
Five years later 1,750 euro (1,250 minimum + 500 overpayment)
.
.
.
Ten years later 1,500 euro (1,000 euro minimum +500 overpayment)

Any ideas?????

wasim21k

AFAIK, you can not do with TSB for sure coz i rang them start of this year, and been told 500 euro each month then once overpayment reach 1500(after three months) then we can either reduce payment or just payoff early,
but it the way u said each month -2euro i dont think they are going to do this. but again this was in start of this year and never rang back to them. so better ring to ur bank.

IsThatSo?

Ta me anseo wrote: »

I suppose the actual details aren't really that relevant. I'll rephrase my original question so you can see what I'm asking.

Also, I can find amortisation tales for loans which tell you how the term reduces with overpayments for Option 1 below, but none that will show how your payments might be affected for Option 2 below.

It would all be irrelevant if no Irish banks give you the option anyway!!

Option 1 (we are currently doing this) :

Mortgage of 230,000 over 25 years with a repayment of 1,400 euro a month.

Overpaying by 500 euro each month will reduce the term by 10 years or so. Effectively it means that our minimum repayment will always be 1,400 but each extra 500 euro takes a week or two off the term so we repay the whole thing early, but pay 1,900 every single month until finish.


Option 2 (do Irish banks give this option? - Other countries do) :

Mortgage of 230,000 over 25 years with a repayment of 1,400 euro a month.

Term remains at 25 years but overpaying by 500 euro each month reduces the minimum repayment due. I don't know the numbers but perhaps each 500 euro takes 2 euro off the repayment or something like that so that after five years our minimum repayment is down to 1,250 euro. This way, we still repay for 25 years but both our actual and minimum repayments fall each month:

First month 1,900 euro (1,400 minimum + 500 overpayment)
Second month 1,898 euro (1,398 minimum + 500 overpayment)
.
.
.
Five years later 1,750 euro (1,250 minimum + 500 overpayment)
.
.
.
Ten years later 1,500 euro (1,000 euro minimum +500 overpayment)

Any ideas?????

Far as I am aware option two is not available in this country. However, I am out of banking a while now and a reducing balance payment may have been introduced somewhere and I have not kept myself up to date.

It would be possible to reduce the payments, just ask for a review of your mortgage. I wouldn't recommend it myself though. Your repayments will not come down to any great degree (below your agreed repayment that is) and really you are saving yourself a fortune in interest by paying back that extra bit every month. Its the best earings you can get from your money!!

If you are considering upgrading your home then look at it this way, you will have already proved that your repayment capacity is higher than your original mortgage repayment and this would stand in your favour with a new mortgage application.

Also, if you are upgrading your home then you don't carry over your existing mortgage, it is closed down and a new one set up therefore repayments would be calculated on the new amount anyway.