Mortgage overpay - who makes it easiest

i have heard the ebs will credit your mortage bank account when you overpay and offset that credit against the principal for interest calculation, but not actually pay down the principal until you direct them to,

in effect its an offset mortgage of sorts and you can withdraw the overpayment if it hasnt been formally set against the principal.

has anyone else heard of this?

any of the other lenders offer anything similar

PTSB offer something similar that allows you to take a break from mortgage payments as long as you have sufficient prepaid or you can decide next year for example to pay it down off your mortgage.

Which lender makes it easiest to overpay without the offset element?

For e.g. if I have an extra 500 in current a/c I do a quick transfer online to move it to mortgage a/c. Ulster told me this isn’t possible

With my AIB mortgage I just transfer money from current account to mortgage.

Only thing I dislike about AIB is I can’t get my mortgage info online as I haven’t got an AIB current account. Paper statements only.

and how do they apply the funds? decrease the principal? decrease the monthly payments or await instructions?

Who makes it easiest? Not AIB anyway.
I transferred money from an AIB current account to an AIB Mortgage account as a test and they decreased the monthly repayment. What I actually expected was for them to decrease the principal.
I inquired and was told that the default if you just transfer to a mortgage account is for the system to decrease the monthly payment. If you want them to decrease the principal you must inform them by letter or email with each adhoc transfer. Alternatively you can set up something regular by prior agreement where they do decrease the principal - however you must stick to the agreed amount every month and advise them again in writing should you wish to go back to paying the basic amount.

sort of a follow on question …

Say new mortgage for example = 300K and first 3yrs fixed at say 3% …repayments 1400 p/m (rough numbers)
…how much capital will have been paid off 300K at the end of year 3? …or is first few years repayments nearly all interest?

I know T&C’s vary …but is there a standard?

Have a look at Karl’s mortgage calculator. That should give you the answer pretty quickly.

I don’t see what the issue is here. You can just keep increasing your “overpayments” as your standard payment reduces if you want to pay off the mortgage early; eventually you will pay off the principal. It is more flexible this way, if your financial circumstances worsen in future, you might be glad of the lower standard payments…

Ulster have the same method, whereby you must inform them in writing for principal overpayments, but I see your point Quango

Are you sure that they weren’t doing both? What happens when I overpay on my AIB mortgage is that the principal is reduced, and the monthly repayment reduces (but the term stays the same). You can have them change the term, but you need to fill in a form each time. However, as long as you maintain the same payment every month via overpayments, the effect in either case is more or less the same and the mortgage will be paid off at the same time anyway.

Tangential, but you can overpay a BoI fixed rate mortgage by up to 10% per month without penalty.

I’d have thought the issue is clear: if the principal isn’t being reduced by as much as tradtshirt intended, that could interfere with his ability to sell up in a negative equity scenario. We’ve lived through a sudden house price collapse.

The idea is that tradtshirt might get an offer on his house that would almost clear the mortgage, but he might owe just that little smidgen too much principal.

If I’m missing something, please point it out.

With BoI you can do it through online banking but have to call them every time to say you’d like it off the principal. I asked if they could put a standing instruction/note on the account to say that any overpayment automatically comes off the principal…but computer said no.

As I understand it you always decrease the principal with any AIB overpayment.

The choice then is between reducing the term and keeping the monthly payment the same, or keeping the original term and reducing the monthly payment. The default is the latter but you can get them to change the behaviour for your account to the former.

I personally prefer to keep the term the same for the reasons Quango gives above.

If your monthly repayment dropped then surely that’s because the overpay was used to pay off the principal?

Pay off principal, term remains the same= lower monthly payments
Pay off term, monthly payment will be the same = fewer monthly payments

Unless by saying your monthly repayment dropped you mean they treated it as an advance payment rather then an overpayment and simply didn’t charge you until it was used up?

I don’t have an AIB current account either, but I do have a savings and masterplan account and I was able to add our mortgage account to my online banking (not sure why I did this as it just depresses me when I log in :open_mouth: )

Fair enough! I do know I can’t get one with just the mortgage. Maybe I’ll open a savings and not put anything in it.