Partial redemption mortgage

jakdublin

Hiya. I guess this isn't a huge deal, but it means my bank is depriving me of an opportunity to save €100 in a mortgage payment.

I went into EBS today to make a partial redemption of my mortgage as my one year fixed term ended earlier this month. I wanted to do this now so it's reflected in my January payment as I'd be saving about €100 a month. However, they told me I can't make the lump payment in December as their system works from the first to the end of the month. But also, if I make the partial redemption in January it won't be reflected in my mortgage payments until February for basically the same BS reason. That means that although I'm on a variable I can't make the partial redemption until their system allows, which effectively means I miss out on €100 savings off the January mortgage payment. What course of action, if any, should I take?

rainbowtrout

What should you do? Nothing whatsoever, if you owe say 100k after the partial redemption in January and there are 5 years left on your mortgage the remaining balance will be split over 4 years and 11 months, after the balance has been made and you have paid the January payment.

If you were allowed pay the money in now, then the balance would be paid over 5 years. You're not losing out by more than a few euro in the interest that will be charged on the remaining balance. The extra €100 in the January payment will make the remaining payments a tiny bit smaller.

jakdublin

rainbowtrout wrote: »

What should you do? Nothing whatsoever, if you owe say 100k after the partial redemption in January and there are 5 years left on your mortgage the remaining balance will be split over 4 years and 11 months, after the balance has been made and you have paid the January payment.

If you were allowed pay the money in now, then the balance would be paid over 5 years. You're not losing out by more than a few euro in the interest that will be charged on the remaining balance. The extra €100 in the January payment will make the remaining payments a tiny bit smaller.

Technically, you were correct but the issue I had was that I'll be in a position to clear the mortgage in a few months so I was looking at missing out on the chance to save €100. Anyway, I made a complaint not really expecting much to come from it but they agreed it was an anomoly in their system and gave me a cheque for the €100. Just posting in case anybody runs into a similar problem.

daheff

jakdublin wrote: »

T I'll be in a position to clear the mortgage in a few months so I was looking at missing out on the chance to save €100.

how do you work out you missed out on the chance to save €100? Surely you have to pay the 100 either way and the only difference is that you pay it in Feb rather than Jan, so pay an extra months interest on the 100 ?

jakdublin

daheff wrote: »

how do you work out you missed out on the chance to save €100? Surely you have to pay the 100 either way and the only difference is that you pay it in Feb rather than Jan, so pay an extra months interest on the 100 ?

I wanted to make the partial redemption to reduce the payments. The reduction works out that my repayments would be around €100 less per month. If I have to wait, which I did, until February it means I'm paying €100 more in January than I would if they'd allowed me to make the redemption. As @rainbowtrout pointed out, it wouldn't make much of a difference over the term of the mortgage, but because I'll be clearing it later this year I felt I was missing out. You should be able to make a partial redemption after you leave a fixed rate. It was their system that wouldn't allow me to do that. Anyway, they agreed with me so happy days.

daheff

jakdublin wrote: »

I wanted to make the partial redemption to reduce the payments. The reduction works out that my repayments would be around €100 less per month. If I have to wait, which I did, until February it means I'm paying €100 more in January than I would if they'd allowed me to make the redemption. As @rainbowtrout pointed out, it wouldn't make much of a difference over the term of the mortgage, but because I'll be clearing it later this year I felt I was missing out. You should be able to make a partial redemption after you leave a fixed rate. It was their system that wouldn't allow me to do that. Anyway, they agreed with me so happy days.

But your repayments would be 100 less in the future because you've paid off a lump sum now. If you pay the lump sum next month, your future repayments would save you more than 100 per month.

Forgetting about interest, its all the same. you pay back the same principal (borrowed amount) in the end.

Including interest, the earlier you pay off the principal the less interest you pay in the long run (and that can be significant).

jakdublin

My head hurts when I try to work it out tbh :-)
OK, the way I look at it is, I was able to make the partial redemption in January and will be able to clear the mortgage in June. So between January and June my repayments would be reduced by €100 per month. However, because of their system, the reduction wouldn't kick in until February, so for January I wasn't benefitting from the reduction. Does that make sense?

Snotty

I understand, by not paying the amount in December you keep the lump sum but that lump sum earns you very little for that month, but if allowed to put it into the mortgage then the lump sum earns you €100 less in mortgage repayments.