Paying off Mortgage early

helimachoptor

Hi all, currently have a mortgage with PTSB I have a tracker at ECB + 2.25.

About 240K left from 290K.
In a position to pay up to €1K per month extra off the amount and/lump sump up to a max of €60K

I called PTSB yesterday and tbh they werent exactly helpful.
They said i would get a reply by letter with 30 days :eek:

My big question is what position of strength am I in?
Can i/or has anyone pushed for either a reduction in interest rate and/or capital if they pay a lump sump or increase their repayment?

Current mortgage repayment is less than €1K per month.

Any/all advice appreciated!

seamus

The tracker is the issue there. Overpayment or lump sum may theoretically constitute a change in the mortgage agreement and they will take any opportunity they can to cancel your tracker.

However, usually with any variable rate (including the tracker), you are free to overpay and/or pay a lump sum at any time without penalty. But you need to check your mortgage agreement.

If your mortgage agreement allows for overpayment and/or lump sum, then they can't refuse it.

If they tell you that doing this will move you onto a variable rate, then I would advise setting up a five-year savings account and putting your €60k and your extra €1k/month into that. This means you'll have €120k + interest in five years, which you can then use to reduce your mortgage (which will probably be around €200k at that point). This will mean that losing your tracker won't be as big a deal, especially if you decide to sell up and clear it.

helimachoptor

Thanks Seamus, yes i'd need to look at specifics in my contract but would request confirmation from PTSB that there would be no change in rate etc for either overpayment scenario.

Ritchi

Given that you are on a tracker that is a lower rate than you would get on deposit, you should put that extra money on deposit either way. If the mortgage interest rate ever goes higher than your deposit rate, then you should use that money to pay off your mortgage.

roro2

Few things here.

There is no question of being moved off a tracker onto a variable rate for making an overpayment.

It's highly unlikely that they will offer you any inducement to make a capital repayment, such as reducing the (Tracker!) interest rate.

You'd have trouble finding a deposit account that would pay a net rate that's even equal to the mortgage interest rate. You would need a gross rate of 4.33% (4.33% gross = 2.9% after DIRT of 33%) to match the mortgage rate of 2.9%. So you're probably better off repaying capital, unless you want to maintain the flexibility of cash on deposit.

fyfe79

I have a tracker with PTSB (0.95%) and I've been overpaying every month for the last 4/5 years by €300. There are no penalties for this.

In fact, I'm sure PTSB are delighted that I'm overpaying my tracker. Not only does it reduce the amount I'll pay in interest over the life of the mortgage, but it also suits them as it will end a loss-making deal for them quicker.

If I was you, I'd book an appointment and negotiate directly with the mortgage advisor in your local branch. The ball's pretty much in your court so you can be reasonably demanding. At the end of the day, the quicker you pay off your tracker the better it is for them.

In fact, a few years ago they sent me letters asking if I was interested in making some non-refundable payments of 5k (up to 50k max) and they would contribute a percentage of my sum (5% I think it was, not totally sure) further against my principle. While retaining my tracker, of course. I didn't have sufficient cash-flow to do that but it would've been worth it if I had!

It's like a game of poker between the banks and customers at this stage when it comes to trackers!

The_Conductor

Ritchi wrote: »

Given that you are on a tracker that is a lower rate than you would get on deposit, you should put that extra money on deposit either way. If the mortgage interest rate ever goes higher than your deposit rate, then you should use that money to pay off your mortgage.

The highest deposit rate PTSB offer is 2.65% AER for a 1 year fixed deposit in excess of 10k.

You would need a rate of over 4%, factoring in DIRT, to better repaying the ECB + 2.25% that the OP is paying at the moment. Rates like this are not available to retail customers.

helimachoptor

Thanks for the comments guys, I work near a PTSB so will make an appointment go see one of their mortgage guys about some plans

draiochtanois

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roro2

draiochtanois wrote: »

This post has been deleted.

Incorrect. DIRT is the full tax liability.

roro2

"D.I.R.T. is a final liability for income tax purposes, i.e. the payment of retention tax at the standard rate by individuals liable to income tax at the higher rate is regarded as satisfying the individual's full liability to this tax." You missed this bit.

You may be liable for PRSI if self-employed, but it's not correct to say that if you pay tax at a higher rate you are liable for a higher amount.

draiochtanois

This post has been deleted.

Scortho

draiochtanois wrote: »

It's not correct either to say D.I.R.T. is a final liability for income tax purposes without mentioning the additional clauses

It's 37% at the moment for self employed and 33% for paye workers rising to 37% for both In 2014.

For a person who is on a tracker of 0.95 % would they not be better saving there money in a deposit account such as Kbc's 3% instant access than paying it off the mortgage?

Is there not also an added advantage of having the savings in case you fall pn hard times?
I'd rather be unemployed with 50k in savings than unemployed with 50k extra paid off my mortgage.

fyfe79

Scortho wrote: »

For a person who is on a tracker of 0.95 % would they not be better saving there money in a deposit account such as Kbc's 3% instant access than paying it off the mortgage?

Is there not also an added advantage of having the savings in case you fall pn hard times?
I'd rather be unemployed with 50k in savings than unemployed with 50k extra paid off my mortgage.

That's exactly my situation. I've a tracker of 0.95% (& ECB=1.7%) and have been overpaying it. Makes more sense to go with the 'Regular Saver' account from KBC which pays out 3.5%, which is what I'm gonna do!

Apparently, the ECB is expected to drop another 0.25% soon enough which would make it even less attractive to overpay the tracker.

Ritchi

smccarrick wrote: »

The highest deposit rate PTSB offer is 2.65% AER for a 1 year fixed deposit in excess of 10k.

You would need a rate of over 4%, factoring in DIRT, to better repaying the ECB + 2.25% that the OP is paying at the moment. Rates like this are not available to retail customers.

That's fair enough. My point was really that you should do the maths above and work out which is the preferable thing to do. Looks like currently in this case, it's paying off the mortgage, but that may change in a few months/years time.

Moonbeam

specify that you want the same monthly payments and want the money take on the principal, it makes a huge difference.