Trouble with making overpayments on mortgage

Diemos

I am looking to move our mortgage, load of folks here have spoken about over payments and make it sound easy.
We have tried once and it was a nightmare, it took 5 months to get things cleared up.
We can only make payments by bank draft and have to send in a written note stating if we would like the payment to be put towards credit, to take off the princial and reduce the monthly repayments or take off the princial and reduce the term.

Can anyone give me some advice on a mortgage provider to move to, thinking of locking in on 5 to 10 years fixed?

L1011

Fixed and overpayments do not go together well, that is going to be a major issue here

amcalester

I'm on a Fixed with BOI and rang them today to set up a monthly over payment. They just increased the Direct Debit from December with the over payment being put towards reducing the term.

If I want to reduce back to my fixed amount I just need to ring up and ask them to do that.

I was surprised at how easy it was. Only (potential) issue is that the over payments are limited to 10% of the monthly payment.

TheChizler

Diemos wrote: »

Can anyone give me some advice on a mortgage provider to move to, thinking of locking in on 5 to 10 years fixed?

Is it possible to split it between fixed and variable, and make the overpayments towards the variable portion?

Diemos

L1011 wrote: »

Fixed and overpayments do not go together well, that is going to be a major issue here.

I'm not completely sold on fixed, I'm just leaning that way.

I can only see interest rates go up from here.

Sausage dog

KBC do split mortgages....some at a fixed rate & some at a variable rate. They also allow overpayment.

pwurple

What bank are you with?

KBC do a 'sweeper', we used that to overpay. We set it up on our online banking, it "swept" any remaining balance in our current account into the mortgage account on a set day each month. (day before we got paid for example).

AIB, I just transfer in the amount online, I can see both accounts there visible. Simple online bank transfer from one account to the other.

BOI, it is a phonecall, can't do it online.

Diemos

I am with Haven.
It's been a nightmare.

So with say KBC take your payment online, does your term drop automatically or does the repayment amount drop?

mirrorwall14

We’re with haven and overpaying by a third monthly by DD. However we aren’t fixed

sunnyday1234

Its so easy with AIB as another poster said. I can see my mortgage account online just like my current account. To overpay all i do is move money from current to mortgage online and i get a letter in the post with my new repayment ammount

I love getting that letter in the post a few weeks later

pwurple

Diemos wrote: »

I am with Haven.
It's been a nightmare.

So with say KBC take your payment online, does your term drop automatically or does the repayment amount drop?

You set up in advance what way you want it to work. We asked for term decrease.

micks_address

pwurple wrote: »

What bank are you with?

KBC do a 'sweeper', we used that to overpay. We set it up on our online banking, it "swept" any remaining balance in our current account into the mortgage account on a set day each month. (day before we got paid for example).

AIB, I just transfer in the amount online, I can see both accounts there visible. Simple online bank transfer from one account to the other.

BOI, it is a phonecall, can't do it online.

When you transfer online to AIB - does anything automatically change in relation to your monthly payment? If you put a lump sum in would the monthly payment reduce?

cruizer101

L1011 wrote: »

Fixed and overpayments do not go together well, that is going to be a major issue here

Why do you say that? Certain banks are a bit trickier to do it with but I wouldn't say is major issue.

Different banks allow different amounts of overpayment, I'm with ulster and they allow 10% of outstanding to be overpaid per year so that is plenty.
To overpay you just get an IBAN and reference number and transfer is the same as any other transfer.

L1011

cruizer101 wrote: »

Why do you say that? Certain banks are a bit trickier to do it with but I wouldn't say is major issue.

Different banks allow different amounts of overpayment, I'm with ulster and they allow 10% of outstanding to be overpaid per year so that is plenty.
To overpay you just get an IBAN and reference number and transfer is the same as any other transfer.

If its allowed at all, its limited and most lenders make it as difficult as possible to do so. Its not quite as bad as it was in the past but if you want to overpay you'll find it much easier on SVR.

fletch

micks_address wrote: »

When you transfer online to AIB - does anything automatically change in relation to your monthly payment? If you put a lump sum in would the monthly payment reduce?

Yes although you can send them a letter (by email) if you wish it to reduce the term.

Diemos

mirrorwall14 wrote: »

We’re with haven and overpaying by a third monthly by DD. However we aren’t fixed

And is your principal being reduced?
We've been told that we have to send in a letter stating our intent with every payment.
Even then when we sent in a letter, "there was no action put against the letter" and the cash just sat in our account as credit.

mirrorwall14

That must be because you are fixed. Ours is coming off the principal, we had a letter issued telling us the new term if we keep it up and I just rang to double check there. We sent a straightforward letter stating the amount of the overpayment and a request that it come off the principal

averagejoe123

Diemos wrote: »

I am looking to move our mortgage, load of folks here have spoken about over payments and make it sound easy.
We have tried once and it was a nightmare, it took 5 months to get things cleared up.
We can only make payments by bank draft and have to send in a written note stating if we would like the payment to be put towards credit, to take off the princial and reduce the monthly repayments or take off the princial and reduce the term.

Can anyone give me some advice on a mortgage provider to move to, thinking of locking in on 5 to 10 years fixed?

Ulster Bank are probably your best bet for what you are looking to achieve here. You can get 2.6% fixed for 4 years. They also allow you to overpay by 10% of the amount borrowed each year.

There are merits for and against lowering your monthly payment v's reducing the term. I personally think you would be mad not to reduce your monthly repayment because if you run into difficulty down the line you will have a small mortgage. If you reduce the term this is irreversible without renegotiating your mortgage terms which will be difficult if your financial circumstances have changed. Also, if you continue to make the regular overpayments on a monthly basis you will be reducing the term, keeping the flexibility and paying the same amount of interest.

mirrorwall14

averagejoe123 wrote: »

Ulster Bank are probably your best bet for what you are looking to achieve here. You can get 2.6% fixed for 4 years. They also allow you to overpay by 10% of the amount borrowed each year.

There are merits for and against lowering your monthly payment v's reducing the term. I personally thing you would be mad not to reduce your monthly repayment because if you run into difficulty down the line you will have a small mortgage. If you reduce the term this is irreversible without renegotiating your mortgage terms which will be difficult if your financial circumstances have changed. Also, if you continue to make the regular overpayments on a monthly basis you will be reducing the term, keeping the flexibility and paying the same amount of interest.

Can I ask a question here? We are currently over paying by a third. It’s coming off the principle and is reducing the term.

What do you mean by the above? Is there a different option to what we are doing? We have two kids, the mortgage is reasonable but only have life insurance on one of us so we want to make sure to use the over payment in the best possible way just in case. In a few years time it would be possible for one of us to repay the mortgage on our own if it came down to it but not right now with childcare costs

averagejoe123

mirrorwall14 wrote: »

Can I ask a question here? We are currently over paying by a third. It’s coming off the principle and is reducing the term.

What do you mean by the above? Is there a different option to what we are doing? We have two kids, the mortgage is reasonable but only have life insurance on one of us so we want to make sure to use the over payment in the best possible way just in case. In a few years time it would be possible for one of us to repay the mortgage on our own if it came down to it but not right now with childcare costs

What I mean by the above is the following.

Say you have a mortgage of €300k over 30 years. Your repayments will be roughly €1,200 a month.

Immediately after taking out the mortgage you win €100k on the lotto which you decide to put off the mortgage. You will be asked if you want to reduce the term and keep the payments the same or reduce the payments and keep the term the same.

Option A- If you reduce the term you will still be paying €1,200 a month but your new term is roughly 17 years.

Option B- If you decide to reduce the repayment it will now be €800 over 30 years. What I recommend is to overpay by €400 a month to bring it up to the same level as the original mortgage. This will reduce the term down to about 17 years too.

With Option A you are committing yourself to repaying the €1,200 for the remainder of the term. You will find it very difficult to switch to option B if you hit financial trouble.

With option B you have the flexibility to overpay as much or as little as you like on a monthly basis. Say you decide to have a 3rd child or one of you loses your job. Having the smaller monthly repayments offers better peace of mind.

You would be better off asking your bank to allocate the overpayments off the capital and not the term. It will vary by bank by bank as to how easy/difficult this is. I am with AIB and it couldn't be easier.

Have a mess around with the figures on here https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator#results

Diemos

mirrorwall14 wrote: »

That must be because you are fixed. Ours is coming off the principal, we had a letter issued telling us the new term if we keep it up and I just rang to double check there. We sent a straightforward letter stating the amount of the overpayment and a request that it come off the principal

Lucky you, we are variable also but our experience was nothing like that.

TheChizler

averagejoe123 wrote: »

Option A- If you reduce the term you will still be paying €1,200 a month but your new term is roughly 17 years.

Option B- If you decide to reduce the repayment it will now be €800 over 30 years. What I recommend is to overpay by €400 a month to bring it up to the same level as the original mortgage. This will reduce the term down to about 17 years too.

Sorry, I used to be more familiar with this but we put off buying for a while so I've forgotten it all .

Going to play around with the calculator but both options should have the same total cost over the lifetime (whatever it ends up being) of the mortgage right? Just B gives you more flexibility.

Edit: I don't think I can test this in this particular calculator.

averagejoe123

TheChizler wrote: »

Sorry, I used to be more familiar with this but we put off buying for a while so I've forgotten it all .

Going to play around with the calculator but both options should have the same total cost over the lifetime (whatever it ends up being) of the mortgage right? Just B gives you more flexibility.

Edit: I don't think I can test this in this particular calculator.

Yes the mortgage terms and interest paid will be roughly the same.

This will also be the case if you do not have the initial lump sum to take off. If you over pay the capital amount outstanding rather than reducing the term on a monthly basis all things being similar, the term and interest paid should be very close.

Who is your mortgage currently with and what rate are you paying? The mortgage market is very competitive at the moment so people should be monitoring their rates as they would with any other utility bill. Between cashback offers and rate reductions there can be huge savings.

TheChizler

averagejoe123 wrote: »

Yes the mortgage terms and interest paid will be roughly the same.

This will also be the case if you do not have the initial lump sum to take off. If you over pay the capital amount outstanding rather than reducing the term on a monthly basis all things being similar, the term and interest paid should be very close.

Who is your mortgage currently with and what rate are you paying? The mortgage market is very competitive at the moment so people should be monitoring their rates as they would with any other utility bill. Between cashback offers and rate reductions there can be huge savings.

Thanks for the info! Don't have one yet but had several pre-application reviews and I've been sure to ask them all what their terms on overpayment are. Talked to Ulster Bank, Permanent TSB, AIB, KBC so far. AIB and KBC seemed the most flexible, the lady in Permanent TSB looked at me funny when I asked about overpaying...

Edit: Just realized your question possibly wasn't directed at me! :pac:

sunnyday1234

averagejoe123 wrote: »

Diemos wrote: »

I am looking to move our mortgage, load of folks here have spoken about over payments and make it sound easy.
We have tried once and it was a nightmare, it took 5 months to get things cleared up.
We can only make payments by bank draft and have to send in a written note stating if we would like the payment to be put towards credit, to take off the princial and reduce the monthly repayments or take off the princial and reduce the term.

Can anyone give me some advice on a mortgage provider to move to, thinking of locking in on 5 to 10 years fixed?

Ulster Bank are probably your best bet for what you are looking to achieve here. You can get 2.6% fixed for 4 years. They also allow you to overpay by 10% of the amount borrowed each year.

There are merits for and against lowering your monthly payment v's reducing the term. I personally think you would be mad not to reduce your monthly repayment because if you run into difficulty down the line you will have a small mortgage. If you reduce the term this is irreversible without renegotiating your mortgage terms which will be difficult if your financial circumstances have changed. Also, if you continue to make the regular overpayments on a monthly basis you will be reducing the term, keeping the flexibility and paying the same amount of interest.

exactly

mirrorwall14

averagejoe123 wrote: »

What I mean by the above is the following.

Say you have a mortgage of €300k over 30 years. Your repayments will be roughly €1,200 a month.

Immediately after taking out the mortgage you win €100k on the lotto which you decide to put off the mortgage. You will be asked if you want to reduce the term and keep the payments the same or reduce the payments and keep the term the same.

Option A- If you reduce the term you will still be paying €1,200 a month but your new term is roughly 17 years.

Option B- If you decide to reduce the repayment it will now be €800 over 30 years. What I recommend is to overpay by €400 a month to bring it up to the same level as the original mortgage. This will reduce the term down to about 17 years too.

With Option A you are committing yourself to repaying the €1,200 for the remainder of the term. You will find it very difficult to switch to option B if you hit financial trouble.

With option B you have the flexibility to overpay as much or as little as you like on a monthly basis. Say you decide to have a 3rd child or one of you loses your job. Having the smaller monthly repayments offers better peace of mind.

You would be better off asking your bank to allocate the overpayments off the capital and not the term. It will vary by bank by bank as to how easy/difficult this is. I am with AIB and it couldn't be easier.

Have a mess around with the figures on here https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator#results

Thanks. We don’t have a lump sum, just the ability to overpay out of salary monthly. I assumed we were on option B but having gone back to Haven she didn’t have a clue what was going on. We never wanted or requested that the term be officially reduced, just asked for the overpayment to be paid off the principle Apparently now we’ll get a letter. Feck it

mirrorwall14

Diemos wrote: »

Lucky you, we are variable also but our experience was nothing like that.

Well we had to write a personal statement as to how we would pay off the mortgage in the event of something happening the uninsured partner, we included that we planned to over pay the mortgage so it would be wierd if they didn’t allow it.

However as I just replied there, they seem to be very confused as to what’s happening without our mortgage when we rang today. Just have to see what happens now

averagejoe123

TheChizler wrote: »

Thanks for the info! Don't have one yet but had several pre-application reviews and I've been sure to ask them all what their terms on overpayment are. Talked to Ulster Bank, Permanent TSB, AIB, KBC so far. AIB and KBC seemed the most flexible, the lady in Permanent TSB looked at me funny when I asked about overpaying...

Edit: Just realized your question possibly wasn't directed at me! :pac:

I would not base my mortgage decision on who will be more flexible in terms of overpayments. I would be looking at the rates and the money back offers. Also don't forget it is far easier now to switch between banks in pursuit of the best offers. Have a look here and see the best available rates for variable and fixed mortgages in Ireland at the moment https://www.askaboutmoney.com/threads/best-buy-for-50-ltv-mortgages-i-e-the-lowest-mortgage-rates-available.205864/


You also have the option to put a portion of your mortgage on a fixed rate and the other portion on a variable rate should you wish to make regular significant overpayments.

averagejoe123

mirrorwall14 wrote: »

Well we had to write a personal statement as to how we would pay off the mortgage in the event of something happening the uninsured partner, we included that we planned to over pay the mortgage so it would be wierd if they didn’t allow it.

However as I just replied there, they seem to be very confused as to what’s happening without our mortgage when we rang today. Just have to see what happens now

This is quite strange from your bank. When people overpay a mortgage they will usually have a default allocation of the funds to reduce the term unless instructed otherwise. Most will check to ensure how you wish to allocate the additional payment.

I would follow up with them and ask what they require from you to handle all future overpayments. It should not be more than a brief letter/email to their mortgage department

TheChizler

averagejoe123 wrote: »

I would not base my mortgage decision on who will be more flexible in terms of overpayments. I would be looking at the rates and the money back offers. Also don't forget it is far easier now to switch between banks in pursuit of the best offers. Have a look here and see the best available rates for variable and fixed mortgages in Ireland at the moment https://www.askaboutmoney.com/threads/best-buy-for-50-ltv-mortgages-i-e-the-lowest-mortgage-rates-available.205864/

Absolutely, lowest lifetime cost will affect my choice, whether that's through rates or what's allowed with overpayments. Both if I'm bothered enough to put a decent spreadsheet together!

mirrorwall14

averagejoe123 wrote: »

This is quite strange from your bank. When people overpay a mortgage they will usually have a default allocation of the funds to reduce the term unless instructed otherwise. Most will check to ensure how you wish to allocate the additional payment.

I would follow up with them and ask what they require from you to handle all future overpayments. It should not be more than a brief letter/email to their mortgage department

Got a callback all ok thank god. Repayments are coming off the principal and term has reduced. Currently if we continue on track we’ll take over ten years off the term but we can always revert to the original term should we wish to and the repayment would be lower. If we reverted now we’ve already taken 60e off the monthly repayment

Edit OP I’ve no idea why you are having hassle overpaying. We’ve had no issues with overpaying haven. Just made one written request to increase the DD and have the overpayment amount be taken off the principle