paying mortgage twice a month

Espoo

Hi Folks
I know this one was discussed before in boards but anyway.
I've got a variable interest rate mortgage with Ulster bank. €147000
drawn down from a €155000 mortgage. (Was fixed for the first 3 years).
Rate is now about 3.95%. (just changed over lately)
Can I pay this twice a month and save a few bob? I did ask the bank before
when i was on the fixed and for a reason I can't remember I either couldn't
or it just wasn't worth the hassle.
I know I can ask the bank again but I just would like to hear from someone neutral first.

Cheers Espoo

killers1

Espoo wrote: »

Hi Folks
I know this one was discussed before in boards but anyway.
I've got a variable interest rate mortgage with Ulster bank. €147000
drawn down from a €155000 mortgage. (Was fixed for the first 3 years).
Rate is now about 3.95%. (just changed over lately)
Can I pay this twice a month and save a few bob? I did ask the bank before
when i was on the fixed and for a reason I can't remember I either couldn't
or it just wasn't worth the hassle.
I know I can ask the bank again but I just would like to hear from someone neutral first.

Cheers Espoo

You can pay it twice a month and will save a small amount of interest over the term of the mortgage. Interest is calculated daily on the mortgage balance outstanding so obviously if you reduce that balance mid-month then the calculation is done on a lessor amount for the rest of that month.

chris85

Espoo wrote: »

Hi Folks
I know this one was discussed before in boards but anyway.
I've got a variable interest rate mortgage with Ulster bank. €147000
drawn down from a €155000 mortgage. (Was fixed for the first 3 years).
Rate is now about 3.95%. (just changed over lately)
Can I pay this twice a month and save a few bob? I did ask the bank before
when i was on the fixed and for a reason I can't remember I either couldn't
or it just wasn't worth the hassle.
I know I can ask the bank again but I just would like to hear from someone neutral first.

Cheers Espoo

There would have been penalties for make extra payments if on fixed rate. There are no penalties for early/extra payments on a variable product. This is covered by the consumer credit act. Thats probably why you didnt do it before.

Espoo

Thanks lads
Thats interesting. I must look in to it more. Suppose I wouldnt save a huge amount? Can one of you work it out? But better off in my pocket than their's

Cheers

chris85

if you can save at a higher rate (after paying DIRT) than your mortgage rate than better to save. This is a rule of thumb and not exact but important.

Liam D Ferguson

If you switch to paying, say, €500 fortnightly instead of €1,000 monthly, there are two savings: - (1) is the saving by paying the capital down early, which is fairly small, but (2) is the fact that you're paying and extra month each year (€13,000 in a full year instead of €12,000) - that can make a big dent in your mortgage over time.

Espoo

Rang mortgage operations and girl I was talking to said that I would save something. Then was chatting to girl in Bank and she said I wouldn't save anything

roro2

Then was chatting to girl in Bank and she said I wouldn't save anything

At a guess - she may have misinterpreted "save", and thought that if the monthly payment was just divided in two, your repayments would not reduce and therefore you would not "save" anything... obviously ignoring the interest element.

Espoo

thanks Roro.
Yeah but I did mention it to her about the interest. Because the way the interest is charged my monthly repayments would be reduced a bit. She disagreed Maybe I need to chat to someone else in there?
Mortgage operations (head office) said something about asking for a suspended lodgement (from branch). (forgot to ask this).
I was reasonably confident that I could save something. What do ya think?

Cheers

copacetic

I wanted to do this as it suited my incoming payments , but AIB wouldn't allow it.

Espoo

Banks Must be losing out too much if they do this?

Liam D Ferguson

Espoo wrote: »

Banks Must be losing out too much if they do this?

Not really. At the moment, the banks are trying to get money in as fast as they can so it suits them if people pay off loans early. But some just don't have the IT systems to handle it.

Espoo

I see.

Ideo

point was raised in the Pricewatch article in the Irish Times a while back

See http://www.irishtimes.com/blogs/pricewatch/2011/04/05/i-made-a-mistake/

THENORTHSIDER

copacetic wrote: »

I wanted to do this as it suited my incoming payments , but AIB wouldn't allow it.

have a mortgage with AIB and changed to fortnightly with no hassle what so ever. Sent a letter requesting change of frequency of payment and that was it

copacetic

THENORTHSIDER wrote: »

have a mortgage with AIB and changed to fortnightly with no hassle what so ever. Sent a letter requesting change of frequency of payment and that was it

Cheers for that, will follow up and push it harder this time.

daveyboy_1ie

THENORTHSIDER wrote: »

have a mortgage with AIB and changed to fortnightly with no hassle what so ever. Sent a letter requesting change of frequency of payment and that was it

Did the same thing myself and knocked about 2 years off my mortgage term.

Espoo

sounds like i need to push this harder too. Maybe like you northsider I will send a letter. Are there any snags to this? i.e paying fortnightly? Did you send letter to bank branch or mortgage center?

Cheers

Espoo

Just got this email from lady at the bank

I was out of the office last week, unfortunately your direct debit can only be paid monthly. I would suggest if you have extra money to put in a savings account to build up & then you can pay a lump sum off the mortgage.

Regards

I guess its just their policy.

leeroybrown

Espoo wrote: »

Rang mortgage operations and girl I was talking to said that I would save something. Then was chatting to girl in Bank and she said I wouldn't save anything

She was wrong. It's compound interest so you will save money.

Espoo wrote: »

I guess its just their policy.

Some banks allow more frequent or flexible payments. Others have outdated IT systems that are very inflexible. They unfortunately can't facilitate anything outside the norm and can only allow occasional large draft lodgements to the mortgage account (they either re-calculate the monthly repayment or term).

Espoo

Thanks Leeroy
Yeah they mustn't have the It system for it. Maybe they will at some stage in the future.