To overpay or not on Tracker Mortgage

mauraf

Hi there

We have overpaid our tracker for the past 3 or so years, by approx 400-500 per month. Similar houses are selling at approx 70% of the mortgage balance outstanding. There are about 17 years left at the current repayment trajectory.

Is it daft to overpay?

We'd like to change house at some stage in the next 2-3 years. Would reverting to the normal payments and building up a cash pile make more sense?

Advice would be welcome!
Maura

murphaph

Which bank? (Some allow tracker transfer to new property-very valuable). What's the margin on the tracker?

mauraf

Hi there - Tracker is with ICS Building Society.....Collateral is the property itself...Plan as I mention, is not to sell now - but maybe in 4-5 years (max) time....I thought if banks were to allow you bring tracker with you, most would only allow the tracker rate on the negative equity piece...

murphaph

ICS are part of the BoI group. BoI themselves recently announced that they would allow the outstanding tracker balance to move to the new property with the remainder funded by a current product at those rates. This was limited to 5years. ICS may not be doing this but their parent company is so might be worth asking. If so, paying extra off the tracker makes little sense as you'll never get credit that cheap again. Margin means the difference between ECB rate and your mortgage rate at any given time by the way.

In any case, it's likely you'll easily beat the tracker rate on deposit, so if I were in your shoes I would not be over paying the tracker.

Edit..sorry, didn't see the reference to negative equity. That changes things alright.

johnwest288

Are you allowed Overpay a Tracker without suffering penalties? Also can you overpay by what ever amount you want within reason?

Engine No.9

johnwest288 wrote: »

Are you allowed Overpay a Tracker without suffering penalties? Also can you overpay by what ever amount you want within reason?

Yes. It is a variable interest loan and these are allowed to be repaid without penalty. Unless its written into the tracker contract.

daheff

well it very much depends on the rate of interest you are paying vs what you could get on deposit.

For eg if you were getting 2.5% (net 1.675% after dirt) and this is greater than the amount you are paying on loan then it doesnt make sense to overpay your mortgage (plus you may also be getting mortgage interest relief on loan interest)


The other thing to consider is that if you overpay your mortgage the bank has the money, not you. If you put it in a deposit account you have cash on hand (handy if some unforseen event occurs and you need it- like losing a job or getting sick)

for me, i'm not overpaying my mortgage. I dont see the benefit in doing so -even if I were to get a lower deposit int rate, i think its better for me to have the money in my pocket than in the banks

niallers1

If you want to change house then you will need a deposit. Once you have the deposit, paid off credit card, car loan or any other un-secured debt then start overpaying your mortgage.

dah

daheff wrote: »

well it very much depends on the rate of interest you are paying vs what you could get on deposit.

For eg if you were getting 2.5% (net 1.675% after dirt) and this is greater than the amount you are paying on loan then it doesnt make sense to overpay your mortgage (plus you may also be getting mortgage interest relief on loan interest)


The other thing to consider is that if you overpay your mortgage the bank has the money, not you. If you put it in a deposit account you have cash on hand (handy if some unforseen event occurs and you need it- like losing a job or getting sick)

for me, i'm not overpaying my mortgage. I dont see the benefit in doing so -even if I were to get a lower deposit int rate, i think its better for me to have the money in my pocket than in the banks

Couldnt have stated it better myself, totally agree