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Has anyone paid off their mortgage quickly?

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    #182
    aido79
    Registered Users Posts: 5,374 ✭✭✭aido79


    Why do banks in Ireland not offer offset accounts like they do in Australia? For those that don't know what this is, it is an account attached to your mortgage which can be used to save money off your mortgage. You still have access to the money in the offset account but it comes off the principal so you don't pay interest on that amount.
    For example if the value of your mortgage was 200k and you had 20k in the offset account you would only pay interest on 180k. You can access the 20k in the offset account but if you were to withdraw 5k you would then be paying interest on 185k.
    I basically use the offset account as a savings account constantly overpaying as much as I can because I know I can access the money if I ever need it. By doing this I can save a small fortune in interest and pay off the mortgage quicker.


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    #183
    ongarboy
    Registered Users Posts: 5,201 ✭✭✭ongarboy


    aido79 wrote: »
    Why do banks in Ireland not offer offset accounts like they do in Australia? For those that don't know what this is, it is an account attached to your mortgage which can be used to save money off your mortgage. You still have access to the money in the offset account but it comes off the principal so you don't pay interest on that amount.
    For example if the value of your mortgage was 200k and you had 20k in the offset account you would only pay interest on 180k. You can access the 20k in the offset account but if you were to withdraw 5k you would then be paying interest on 185k.
    I basically use the offset account as a savings account constantly overpaying as much as I can because I know I can access the money if I ever need it. By doing this I can save a small fortune in interest and pay off the mortgage quicker.
    I recall some Irish bank offering something similar to this back in the mid 2000s but like a lot of things, it was withdrawn when the banks were hit by the 2008 financial collapse.


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    #184
    manonboard
    Registered Users Posts: 1,102 ✭✭✭manonboard


    aido79 wrote: »
    Why do banks in Ireland not offer offset accounts like they do in Australia? For those that don't know what this is, it is an account attached to your mortgage which can be used to save money off your mortgage. You still have access to the money in the offset account but it comes off the principal so you don't pay interest on that amount.
    For example if the value of your mortgage was 200k and you had 20k in the offset account you would only pay interest on 180k. You can access the 20k in the offset account but if you were to withdraw 5k you would then be paying interest on 185k.
    I basically use the offset account as a savings account constantly overpaying as much as I can because I know I can access the money if I ever need it. By doing this I can save a small fortune in interest and pay off the mortgage quicker.

    Ive read about these accounts before. They sound brilliant. Do you mind if i ask what the bank gets from this? I was surprised they offered it. Was it a feature to compete with other banks with? eg: better product?


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    #185
    Fkall
    Registered Users Posts: 135 ✭✭Fkall


    aido79 wrote: »
    Why do banks in Ireland not offer offset accounts like they do in Australia? For those that don't know what this is, it is an account attached to your mortgage which can be used to save money off your mortgage. You still have access to the money in the offset account but it comes off the principal so you don't pay interest on that amount.
    For example if the value of your mortgage was 200k and you had 20k in the offset account you would only pay interest on 180k. You can access the 20k in the offset account but if you were to withdraw 5k you would then be paying interest on 185k.
    I basically use the offset account as a savings account constantly overpaying as much as I can because I know I can access the money if I ever need it. By doing this I can save a small fortune in interest and pay off the mortgage quicker.
    The downside to these mortgages is that you pay a slightly higher interest rate.


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    #186
    aido79
    Registered Users Posts: 5,374 ✭✭✭aido79


    Fkall wrote: »
    The downside to these mortgages is that you pay a slightly higher interest rate.

    Yes that's true plus they are only available on a variable mortgage. To answer manonboard's question above this is probably one of the reasons why banks offer it, that and the fact that they can use the money in these accounts to invest in other things.
    At the minute I have my mortgage half variable and half fixed. The variable part of the mortgage has an interest rate of 4.19% and the fixed part has an interest rate of 3.89% for 3 years.
    If I were to just have a fixed mortgage with a rate of 3.89% I would save around 15k over the course of the mortgage but having the mortgage set up the way I have it now will saves multiples of that due to constantly overpaying without having to worry about not being able to access the money.
    If I were to keep the money in the offset account in a regular saving account I would have to pay tax on the interest earned but this is not the case when its in an offset account. To get the same benefit from any other investment I would need to get a pretax return of 7 or 8%. I don't think such an investment exists where the risks are low and I can access the money with a day's notice if needed.


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    #187
    WhatsGoingOn2
    Registered Users Posts: 525 ✭✭✭WhatsGoingOn2


    aido79 wrote: »
    Yes that's true plus they are only available on a variable mortgage. To answer manonboard's question above this is probably one of the reasons why banks offer it, that and the fact that they can use the money in these accounts to invest in other things.
    At the minute I have my mortgage half variable and half fixed. The variable part of the mortgage has an interest rate of 4.19% and the fixed part has an interest rate of 3.89% for 3 years.
    If I were to just have a fixed mortgage with a rate of 3.89% I would save around 15k over the course of the mortgage but having the mortgage set up the way I have it now will saves multiples of that due to constantly overpaying without having to worry about not being able to access the money.
    If I were to keep the money in the offset account in a regular saving account I would have to pay tax on the interest earned but this is not the case when its in an offset account. To get the same benefit from any other investment I would need to get a pretax return of 7 or 8%. I don't think such an investment exists where the risks are low and I can access the money with a day's notice if needed.

    Not necessarily true. I have an offset mortgage and a low tracker rate from Ulster Bank. Mortgage since 2007.


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    #188
    cojomo2
    Registered Users Posts: 3,216 ✭✭✭cojomo2


    beertons wrote: »
    Literally just fixed our interest rate, 3% for 3 years. We were on 4% variable.

    Just be careful if you try to over pay, while in a fixed term. I can't find the paperwork now, but you'll owe the bank the difference of what they should have gotten, to what they got.

    What bank are you with? Some banks allow you to overpay on a fixed mortgage with no penalty. .there are limits though,KBC allow you to pay up to 10% of the outstanding mortgage balance during the fixed period.


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    #189
    soap1978
    Registered Users Posts: 723 ✭✭✭soap1978


    WhatsGoingOn2 wrote: »
    Not necessarily true. I have an offset mortgage and a low tracker rate from Ulster Bank. Mortgage since 2007.
    i have the same with ulster bank,would u be better offset the money or overpay monthly rate?


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    #190
    WhatsGoingOn2
    Registered Users Posts: 525 ✭✭✭WhatsGoingOn2


    soap1978 wrote: »
    i have the same with ulster bank,would u be better offset the money or overpay monthly rate?

    Definitely offset. It is the same as overpaying except you have full access to your money if you ever need it.


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    #191
    soap1978
    Registered Users Posts: 723 ✭✭✭soap1978


    WhatsGoingOn2 wrote: »
    Definitely offset. It is the same as overpaying except you have full access to your money if you ever need it.
    will it effect ur TRS amount?


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    #192
    phormium
    Registered Users Posts: 3,340 ✭✭✭phormium


    Offset mortgages were offered here, they were initially a First Active product and worked exactly as already explained. They were a variable rate which was also a tracker and were at 1.15% over ECB. I still have one, they stopped obviously when trackers did and then UB took over FA so that was the final end of them. National Irish had something similar as did PTSB but the FA one was the closest to the Australian model. A brilliant product if used correctly.

    They do affect TRS in that obviously if you don't pay as much interest then you wouldn't get as much TRS if you were entitled to it but then that's not a bad thing as to get tax relief of 20c you need to pay a euro, not a great deal really, better to save paying the euro in the first place.


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    #193
    beertons
    Hosted Moderators Posts: 23,096 ✭✭✭✭beertons


    cojomo2 wrote: »
    What bank are you with? Some banks allow you to overpay on a fixed mortgage with no penalty. .there are limits though,KBC allow you to pay up to 10% of the outstanding mortgage balance during the fixed period.


    With BOI. Can't pay anything over, a we'd be penalized. We're probably paying the most comfortable amount too.


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    #194
    SozBbz
    Registered Users Posts: 1,889 ✭✭✭SozBbz


    beertons wrote: »
    With BOI. Can't pay anything over, a we'd be penalized. We're probably paying the most comfortable amount too.

    BOI allow you to pay +10% without penalty. All you have to do is ask them.


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