Loan with sub-accounts

PJ-Dub

Registered User
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Hi all,

I have a loan with sub-accounts at different rates (a portion at 3% and a portion at 4.5%). When I make repayments should the loan with higher interest be reduced first and is there any regulation around this?

Currently the sub-account with lower interest is being reduced first by my bank and this ends up costing me more over the life of the loan (40 year mortgage).

Regards, PJ
 
I am not sure what you mean by sub accounts and a mortgage would not be considered a sub account. I think you may be based outside Ireland because as far as I am aware we don't have 40 year mortgages here.
 
We have lots of 40 yr mortgages, common in the boom but I don't understand the sub accounts either, do they have different account numbers?
 
Op, My guess is that you have two loans, one at an i of 3% and one with an i of 4.5%, both which seem to have the end date.
How is the monthly repayment actually calculated?
Is it P plus i on one and i only on the other or as they saw "wha"?

Please set out the repayment agreement on both loans.
The only way you can get the capital on the 4.5% to reduce first, is to pay P plus i on it and i only on the 3%
 
I suspect the poster is UK based.

Banks there offer a mortgage with a combination of different repayment methods with different interest rates over different mortgage terms.

The mortgage is split into multiple parts called sub-accounts.
 
Thanks for your responses.

It's an Ireland Mortgage with First Active (now UB). Total loan was 380k and I got a 3% fixed for first 200k and SVR for balance of 180k. It is one mortgage account number but one has /1 and the other has /2.

When I make the monthly repayment (a single DD payment, not two) the capital reduces on both but I would prefer that higher rate portion is reduced before the lower rate.

I think there is regulation on Credit Cards for this I.e. Purchased which attract higher interest get paid off first but not sure about mortgages.

I called the bank and asked about putting the 3% portion on interest only but would only do this if I was in financial difficulty.

What do you think?
 
They are two separate accounts, at least they were when they were First Active loans, not sure what UB have done with them. First Active account numbers have been changed to fit the UB system so somewhere the dd you are paying is being redirected to the two original loans that you have.

It's not that it was one account number, the main number for all a customer's accounts was the same, it was called a customer number rather than an account number, the end bit then denoted what type of account and which one it was, for example you could have 4 mortgage accounts for 4 different properties or on the same property, they would all start with the same customer number but would have a different ending, for example 9401 would mean mortgage no.1, 9402 no 2, 9201 top up no. 1, 0101 investment account no1 and so on.

I doubt you have an option to make all the repayment go to the higher one as both would have repayment terms and amounts on them. They are both separate mortgage accounts secured on the same property. If you just stopped paying one in favour of the other then you would be in arrears on the unpaid one. These are totally separate accounts, not sub accounts. Your mortgage was structured in that way as a split fixed/variable for whatever reason at the time. Not uncommon to go for the option of half fixed half variable, kind of spreads your bets, rates rise you win on the fixed, rates go down you win on the variable.
 
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have u suggested making the same payment per month and have all the capital come off the SVR, as well as the SVR i and leave the 3% i only.
Before u ask them do the math so as u know when the revised final repayment date is for both and make sure you have enough life cover because once u go i only on the 3% u run the risk of pushing out the final repayment date beyond the life cover date, it depends on the math.
 
You have, in effect, two loans where the repayment on each is calculated separately, along the following lines:

upload_2015-8-2_9-37-51.png


Why on earth should the lender allow you to pay off the more expensive loan first?

As a matter of interest, when did you take out a fixed rate loan at 3%? How long does the fixed rate last for?
 
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