How does PTSB treat overpayments on mortgages?

H

Howitzer

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The way PTSB structure all their over-payments, not just this one, of taking it off the end of the mortgage doesn't feel right with me. I've asked for clarification - via someone - on this before and don't feel I've ever received a satisfactory answer. (I'm blaming the "someone" in this case, not PTSB. A lot was lost in translation.)

On the yearly mortgage statement the overpayment is simply put to one side and accumulates as the original mortgage decreases at it's original rate. When the overpayment equals the amount outstanding the mortgage term is ended early.

So the overpayment sits there earning no interest. The mortgage still applies interest to the entire amount outstanding as if no overpayment was made. Your only saving is in the interest you would have paid in the final years.

This is probably a separate issue to this bonus. I just haven't seen a good explanation of how PTSB treat over-payments.
 
As I believe that Howitzer is incorrect, I have temporarily deleted the replies which are just confusing.

I have written a guide to Mortgage Repayment Calculations , which people might need to read to understand the principles behind this.

Here is the PTSB's brochure on [broken link removed]

B. Overpayment options
1. Lump Sum Payments
(i) Lump Sum Payments of any amount will be
(a) credited to the mortgage account thus reducing the loan balance outstanding and allowing the funding of future Underpayments or Payment Holidays with Overpayments or
(b) in the case of Annuity Mortgages applied, at the option of the Applicant, to reduce the loan term or
(c) applied, at the option of the Applicant, to reduce the Applicant’s monthly repayments and to continue to repay the loan over the remaining term.

(ii) Interest may be adjusted, in the case of monthly rest accounts on the first day of the month following receipt of payment of the Lump Sum and in the case of daily rest accounts, on receipt of payment of the Lump Sum.

(iii) Where the lump sum payment is made in respect of a fixed rate mortgage prior to the expiry of a fixed interest rate period, the applicant shall pay an additional sum calculated in accordance with the conditions relating to fixed rate loans as provided in General Mortgage Loan Approval Conditions applicable to the Applicant’s mortgage. (Please see important information on “Fixed Rate Loans” at the end of the terms and conditions).

(iv) In order to reduce the term of the mortgage or, the monthly repayment, from a lump sum payment, the applicant must complete the appropriate section in the attached application form.

(v) In the case of Annual Interest Mortgages, Lump Sum Payments will only be included for interest calculation purposes from the 31st December of that year and thereafter. (Note these are very old mortgages where interest was calculated once a year - not relevant - Brendan Burgess)

(vi) No interest benefit will accrue for Lump Sum P ayments on former Irish Permanent Endowment mortgages or permanent tsb Interest Only or pension backed mortgages unless the credit is transferred off the capital. (Not sure why this is - but does not apply to repayment mortgages)

(vii) This option cannot be exercised in conjunction with Underpayments and Overpayments
 
So what does this mean?

We are talking about normal overpayments here and not the overpayments which attract the 10% bonus.

If you have a nomal repayment mortgage with them, you can make an overpayment.

The interest will be calculated on the reduced balance.

If you wish to take a payment holiday at a later stage or if you wish to reduce your repayments, you will be allowed to do so.

When you make your repayment, you may choose to
1) keep the same mortgage term and reduce your repayments
2) keep the same repayments and reduce your term.
 
Howitzer said:
On the yearly mortgage statement the overpayment is simply put to one side and accumulates as the original mortgage decreases at it's original rate. When the overpayment equals the amount outstanding the mortgage term is ended early.

So the overpayment sits there earning no interest. The mortgage still applies interest to the entire amount outstanding as if no overpayment was made. Your only saving is in the interest you would have paid in the final years.
Click to expand...

Hi Howitzer
I don't think you are correct.

The overpayment sits there ok.

But the interest is calculated on the net balance.

They don't add interest to the overpayment as such.
 
I'd certainly put my hand up and say I'm incorrect. I was simply raising the question as the way it's presented by PTSB on their statements isn't clear.

There are no stupid questions (just lots of inquisitive idiots) and the days of trusting a bank is long gone.
 
I don't know why PTSB is not promoting this facility and explaining it better.

Lots of people with SVR mortgages would be well advised to make these overpayments. It would be the equivalent of getting a rock solid 5.3% tax free return on their money.

Brendan
 
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