Bank of Ireland fixed rate mortgage overpayment

ola23

Hi all

I have some savings and thought to put 10k as lump sum towards my fixed rate mortgage with BoI.

I called the mortgage team to ask about the fee. The first consultant told me the penalty/redemption fee would be over 4k. I wouldn't believe that half of the 10k would go for a fee but she was positive.

Then I called again and the other guy told me the penalty on 10k would be only 100eur.

I don't know what to do now, would 4k be possible? I am not changing the rate or paying off the whole amount. I expect there would be some fee but calculated on the 10k of overpayment only and not the whole mortgage amount.

Thank you for any advice

cython

You'd need to provide a bit more info, such as your fixed rate, time left on fixed period, when you fixed, etc. for anyone to give an informed estimate, but on the face of it the 4k seems excessive.

Depending on your specific circumstances, the break fee calculation could come out as zero or negative (treated as zero), if you are on a rate from a year or more ago, but could equally see you owe something if you fixed recently and are in line with market rates.

ola23

Hi Cython, it is 3.95% fixed two months ago, 4years left.

tvjunki

https://www.boards.ie/discussion/comment/121609926#Comment_121609926

You really need to speak to the mortgage team in Boi. Ask o speak to the mortgage broker team. I think there are a few dedicated to advice on overpayment or payment holidays.

If you took a payment holiday during covid boi might not charge break fee but it does depend on market rates.

Also you can overpay with a fixed rate mortgage 10% of your original repayment amount each month with no break fee. check your mortgage paperwork and it should be there if you fixed.

Tar.Aldarion

I checked for myself today, fixed 6 months ago, was an €8k fee!

lau1247

The formula is on their website, you just need to follow it, you should be able to get a value that matches what you were quoted.

Repaying your Mortgage early

When a fixed rate period applies to a Loan or part of a Loan we may suffer a loss if (1) you repay the Loan or part of it before the date you were due to pay it; or (2) you and we agree in writing to change the fixed rate to a new fixed Interest rate or to a variable interest rate; or (3) we oblige you to pay all amounts which you owe us following your default.

If we suffer such a loss you must pay us compensation when we ask you to pay it. Such compensation will be equal to “C” where:

C = A x (R%-R1%) x D ÷ 365, and

“A” = the amount repaid early (or the amount for which the fixed rate is changed to a new rate) averaged from the date of early repayment (or rate change) to the end of the fixed rate period to allow for scheduled repayments (if there are any) and interest charges.

“R%”= the annual percentage interest rate which was the cost to us of funding an amount equal to “A” for the originally intended fixed rate period.

“R1%”= the annual percentage interest rate available to us for a deposit of an amount equal to “A” for a period equal to “D”.

“D” = the number of days from the date of early repayment (or rate change) to the end of the fixed period.

Here is a worked example: Let us assume you wish to repay €100,000 on a fixed rate before the fixed rate period ends.

“A” = €100,000, “R” = 5%, “R1” = 3%, “D” = 2 years or 730 days:

C = €100,000 x (5%-3%) x 730 ÷ 365

So, C = €100,000 x 2% x 730 ÷ 365

C = €4,000

If you owe us compensation (the amount equal to “C”), we will add the amount to your mortgage loan account on the day after the fixed rate ends early for any of the reasons set out above. This means that interest will be applied to it at the same rate that applies to your mortgage loan. If you wish to pay the compensation amount, you can do so at any time by calling the Bank on 01 611 3333, Mon to Fri 9am-5pm, and arranging to pay the amount equal to “C”.

Regulatory Notice for Asset Covered Security Act

Bank of Ireland Mortgage Bank u.c. - Prudent Market Value for the purposes of the Asset Covered Securities Act, 2001 Regulatory Notice (Section 41(1)) 2004 [Irish Residential Property Assets/Mortgage Credit Assets]. For the purpose of satisfying publication requirements which apply under the above referenced regulatory notice, Bank of Ireland Mortgage Bank u.c. hereby gives notice that the Prudent Market Discount that applies in relation to Bank of Ireland Mortgage Bank u.c. for the purposes of that regulatory notice is currently 0.15 (in percentage terms 15%).

Bank of Ireland Mortgage Bank u.c. subscribes to the European Voluntary Code of Conduct on Pre-Contractual Information for Home loans. A copy of this Code is available on request from Bank of Ireland Mortgages.

The lender is Bank of Ireland Mortgages. Registered Office 40 Mespil Road, Dublin 4, DO4 C2N4. Lending criteria and terms and conditions apply. Applicants must be aged 18 or over.

Link: https://personalbanking.bankofireland.com/borrow/mortgages/information-and-legal-notices/

Tar.Aldarion

https://www.boards.ie/discussion/comment/121692329#Comment_121692329

That's weird as they quoted me a fee without asking how much I wanted to overpay.

lau1247

That definitely doesn't sound right.

It should be formula based. Maybe for fun, you should ask them how they reached that figure, see how they worked that figure out.

Tar.Aldarion

Yeah I'm going to ring again, makes no sense

JVince

https://www.boards.ie/discussion/comment/121691499#Comment_121691499

That would be for redeeming a full balance. Not 10k as requested

Gruser

On a similar theme, when on a variable rate, do all lump sum contributions come off the principle only or should that also be clarified with your bank?

Tar.Aldarion

https://www.boards.ie/discussion/comment/121717958#Comment_121717958

Cool, I'll check, I didn't mention any amount, just is there currently a fee to overpay on my mortgage.

Q&A

https://www.boards.ie/discussion/comment/121718314#Comment_121718314

There's no break fees on variable rate mortgages. So all lump sums go to paying down what you owe.

Gruser

https://www.boards.ie/discussion/comment/121719068#Comment_121719068

Great thanks, that's what I thought/hoped. So as you overpay on a variable, does the standard monthy payment drop after each overpayment (assuming the variable rate has stayed the same)?

Q&A

https://www.boards.ie/discussion/comment/121720888#Comment_121720888

One of two things should happen, either the repayments go down or the term remaining should reduce. No sure what BOI default to but I'd be surprised if it wasn't a lower monthly repayment.

Gruser

https://www.boards.ie/discussion/comment/121720931#Comment_121720931

Perfect thanks.

whatever76

I recently went variable with BOI after 4 year fixed as wanted to start putting in lump sums without being charged - plus there was no difference between fixed and variable rate that was offered really so I said I go variable for a while ! I Kept monthly repayment same as was 10% overpaying anyway in Fixed .. I think be default BOI overpayments mean reducing the term which suits me at the moment