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.
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.
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 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…
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.
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.
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.
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 )