Paying off Morgtage Early

AthAnRi

If you have a 35 year morgtage and want to pay it off, or at least half it off, will the bank allow you to do this?

I am currently the owner of a 35 year mortgage. Along with my sister. I am thinking about going to UK on a contract and if I put the head down and save for 3-4 years I should have enough to pay off my half of the morgtage or at least the vast amjority of it.

Any help is appreciated.

jetski

Yes you can, once you dont have a fixed rate mortgage.

Its a great idea and more people should be doing it.

you will save yourself a very large amount of money if you do.

wench

Just bear in mind that the bank won't see any distiction between "your half" of the mortgage and your sister's.
If you pay back your portion, and she were to default, you would still be on the hook for it.

Del2005

jetski wrote: »

Yes you can, once you dont have a fixed rate mortgage.

Its a great idea and more people should be doing it.

you will save yourself a very large amount of money if you do.

You can pay off a certain amount , I think it's 10% but may be totally wrong, when on fixed rate without penalty with KBC not sure of the rest.

Found out when I called about paying some money off mine when my fixed rate ended. I only remembered reading about the penalty for paying off full mortgage when in fixed, but it must have been somewhere in all the papers I got.

Thoie

Depending on your bank (but I think most banks allow it) you don't have to put in a lump sum at the end of 3-4 years - you can put in an additional amount each month if it's not fixed. By paying extra each month you're saving on some of the interest that's accruing during that 3-4 years, and can shorten the term that way.

ZYX

AthAnRi wrote: »

If you have a 35 year morgtage and want to pay it off, or at least half it off, will the bank allow you to do this?

I am currently the owner of a 35 year mortgage. Along with my sister. I am thinking about going to UK on a contract and if I put the head down and save for 3-4 years I should have enough to pay off my half of the morgtage or at least the vast amjority of it.

Any help is appreciated.

It really depends on your financial situation. Your mortgage is probably the cheapest loan you will ever get. So for example if you want to buy a new car in 4 years time. There is little point having paid 10,000 off your 3% mortgage and then borrowing 10,000 at 10% to buy a car. Get a clear idea of your financial needs first. Also you are probably financially better at present earning interest on your money in a high intrest deposit account than paying off your mortgage.

Qualitymark

Do it. You won't know yourself. The happiness, the relief! And you'll have so much more security if your wages don't have a big mortgage-shaped hole in them every month.

jetski

ZYX wrote: »

It really depends on your financial situation. Your mortgage is probably the cheapest loan you will ever get. So for example if you want to buy a new car in 4 years time. There is little point having paid 10,000 off your 3% mortgage and then borrowing 10,000 at 10% to buy a car. Get a clear idea of your financial needs first. Also you are probably financially better at present earning interest on your money in a high intrest deposit account than paying off your mortgage.

But thats 10k at 3% over 35 years vs 10k at 10% over 1 year.

So consider your 10k is only saving you 3% a year but its over 35 years so it adds up to alot.

and he's probably on a higher rate than 3% anway

Qualitymark

And if you've paid off your mortgage, it's easier to actually save up to buy things like cars, so you don't have to be in hock to the banks.

ZYX

jetski wrote: »

But thats 10k at 3% over 35 years vs 10k at 10% over 1 year.

So consider your 10k is only saving you 3% a year but its over 35 years so it adds up to alot.

and he's probably on a higher rate than 3% anway

No. You have to look at the interest rate. The question is, does he save the money and use the savings to buy the car or, dies he pay 10,000 saving off the mortgage saving 3% a year then a year later go and borrow 10,000 at 10%

TwoShedsJackson

ZYX wrote: »

No. You have to look at the interest rate. The question is, does he save the money and use the savings to buy the car or, dies he pay 10,000 saving off the mortgage saving 3% a year then a year later go and borrow 10,000 at 10%

You post this in every thread asking about paying off mortgage rates. Your mortgage is not 'one of the best value loans you will get', it's one of the worst because of the massive repayment period. A car loan is a higher interest rate over a shorter period of time.

On the mortgage the 10 grand at 3% will cost you around 16,000 over 30 years. That's assuming rates stay at 3%, which is highly unlikely.

10 grand at 10% on a car loan is repaid in 3 to 5 years, and you repay a total of around 13,000 in that time. You can't just look at the interest rate, you have to consider how long you will be paying the interest for.

jetski

Yea, thats what i was trying to say and also consider the OP's mortgage is over 35 years and not 30.

ZYX

TwoShedsJackson wrote: »

You post this in every thread asking about paying off mortgage rates. Your mortgage is not 'one of the best value loans you will get', it's one of the worst because of the massive repayment period. A car loan is a higher interest rate over a shorter period of time.

On the mortgage the 10 grand at 3% will cost you around 16,000 over 30 years. That's assuming rates stay at 3%, which is highly unlikely.

10 grand at 10% on a car loan is repaid in 3 to 5 years, and you repay a total of around 13,000 in that time. You can't just look at the interest rate, you have to consider how long you will be paying the interest for.

I have gone through this before as you said but some people still fail to grasp basic maths. Interest rate is the most important. If you are going to pay off any loans you pay off the one with the highest rate first not the one with the longest term. This is basic home economics. Ask any accountant or anyone in business.

I am not saying don't pay off a mortgage early but do not pay off a low interest loan and replace it with one at a higher rate irrespective of term.

To pay off one loan and replace it with one at a higher rate is just plain stupid. If you cannot understand that then no amount of posts from me will enlighten you but think of it this way. Ignore the car. If you are right then the smart thing for someone to do is go to the bank, get a loan for €10,000 at 10% a year over 5 years and use that money to pay off their 3% mortgage. Now do you see how stupid that is.

TwoShedsJackson

The OP isn't intending to pay off part of his mortgage and then re-borrow the money - that's being used as an example to try to explain to you that you cannot just look at the interest rate on a loan and declare that the lower rate loan must be better, you also have to consider the repayment period.

You're ignoring some basic maths yourself by ignoring the repayment period and saying ' 3% good, 10% bad' with no though given to a 60 month repayment period versus a 420 month repayment period.

Once again, no-one is suggesting the OP borrow money at 10% over 5 years to repay part of his mortgage, obviously that is stupid. What I was trying to point out to you is the fact that 10,000 at 10% over 5 years will cost about 13,000, whereas 10,000 at 3% over 35 years will cost about 16,000. As a result, your mortgage is not and cannot be 'the best value loan you will ever get'.

ZYX

TwoShedsJackson wrote: »

The OP isn't intending to pay off part of his mortgage and then re-borrow the money - that's being used as an example to try to explain to you that you cannot just look at the interest rate on a loan and declare that the lower rate loan must be better, you also have to consider the repayment period.

You're ignoring some basic maths yourself by ignoring the repayment period and saying ' 3% good, 10% bad' with no though given to a 60 month repayment period versus a 420 month repayment period.

Once again, no-one is suggesting the OP borrow money at 10% over 5 years to repay part of his mortgage, obviously that is stupid.

Yes they were. Maybe not you.

TwoShedsJackson wrote: »

What I was trying to point out to you is the fact that 10,000 at 10% over 5 years will cost about 13,000, whereas 10,000 at 3% over 35 years will cost about 16,000. As a result, your mortgage is not and cannot be 'the best value loan you will ever get'.

Right now add in the other figures you are ignoring. 10K at 10% over 5 years costs €210.36 a month whereas over 35 years at 3% costs €38.26. Thats a difference of €172.10 a month for 5 years. Are you totally ignoring that? After the 5 years that adds up to €10,326 difference. So the guy who got the 35 year mortgage can now pay off the rest of the mortgage and be over €2000 better off. Even if he didn't do that he has this extra money which can be invested anywhere.

Also you are totally ignoring the effects of inflation. Also you keep on saying mortgages have a massive repayment period. No they don't. You can get a mortgage over 1 year if you want. The mortgage term can be shorter than the term loan.

Rhacko

ZYX wrote: »

Yes they were. Maybe not you.



Right now add in the other figures you are ignoring. 10K at 10% over 5 years costs €210.36 a month whereas over 35 years at 3% costs €38.26. Thats a difference of €172.10 a month for 5 years. Are you totally ignoring that? After the 5 years that adds up to €10,326 difference. So the guy who got the 35 year mortgage can now pay off the rest of the mortgage and be over €2000 better off. Even if he didn't do that he has this extra money which can be invested anywhere.

Also you are totally ignoring the effects of inflation. Also you keep on saying mortgages have a massive repayment period. No they don't. You can get a mortgage over 1 year if you want. The mortgage term can be shorter than the term loan.

Spot on
Use the difference (172.10) to overpay the lower interest loan and heres what your 10000 will cost using your figures
Effect of increased repayments...
Term:
4.22 years
Loan amount:
€10,000
Monthly payment:
€210.36
Total to be repaid:
€10,650
Total interest:
€650

http://mortgages.ie/index.cfm/spKey/first_time_buyers.payment_accelerator.html

Hell of a saving there

ZYX

ZYX wrote: »

I have gone through this before as you said but some people still fail to grasp basic maths. Interest rate is the most important.

No, term of loan is the most important because it's compound interest, assuming we're talking an annual rate
And in terms of total interest repaid.