Mortgage overpayment queries

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New2024

New Member
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Hi i have a few queries on over overpaying my mortgage.
To start my term was 29 years.
As of today i have 27years and 5months left.
Drawdown amount. €279k
My payment day 1 was €1077.
Aib 5year fix 2.15%
Interest charged every 1/4 on net principal balance.
Iv overpaid by an X amount i cant remember exact figure.
Today repayment amount is €1040.
having read overpaying to reduce contractual repayment amount is the same as reducing the term.
If i was to continue to overpay and reduce contractual repayments amount add the extra overpayment by the amount reduced on to the next payment and so on for the the remainder of the 5 year fix term. If i stop overpaying then for the rest of the mortgage term will the term have been reduced or do you have to continue to overpay indefinitely until the mortgage is closed.
Just to add in work i will be retired on 2050.
Mortgage not up until 2051
Thanks
 
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Sorry, I'm struggling to read your post the way it's formatted.

Everytime you make an overpayment, or change interest rates, AIB will recalculate your repayment amount based on current valance and remaining contractual term.

At the dnd of the fixed, they'll change rare and calculate a new repayment.

So, if at the end of your fixed rate you just pay the contractual repayment, then the term won't reduce. You will need to keep overpaying, or alternatively get the term reduced to suit you.

With AIB you cannot contractually reduce the term during a fixed interest rate without losing the onterest rate - they treat it as a break.
 
RedOnion said:
Sorry, I'm struggling to read your post the way it's formatted.

Everytime you make an overpayment, or change interest rates, AIB will recalculate your repayment amount based on current valance and remaining contractual term.

At the dnd of the fixed, they'll change rare and calculate a new repayment.

So, if at the end of your fixed rate you just pay the contractual repayment, then the term won't reduce. You will need to keep overpaying, or alternatively get the term reduced to suit you.

With AIB you cannot contractually reduce the term during a fixed interest rate without losing the onterest rate - they treat it as a break.
Click to expand...
Thanks
how does one reduce the term when the fixed rate is up and before starting a new rate, what is the procedure.
Thanks
 
Just phone AIB and ask them to do it, and they'll send a form. Or alternatively they will send you a letter when you make an overpayment.
Because changing term is an amendment to the contract, I believe they need it in writing and signed.
It's very straightforward to do.
 
Why do you want to explicitly rather than effectively reduce the term?
Why not just leave it as it is even if you are making accelerated repayments?
If only because should you hit financial trouble in the future it leaves you with some breathing room.
 
ClubMan said:
Why do you want to explicitly rather than effectively reduce the term?
Why not just leave it as it is even if you are making accelerated repayments?
If only because should you hit financial trouble in the future it leaves you with some breathing room.
Click to expand...
I wont have it paid off by 2051 and i cant afford to overpay for for the next 25+ years and i retire in 2050
 
New2024 said:
I wont have it paid off by 2051 and i cant afford to overpay for for the next 25+ years and i retire in 2050
Click to expand...
Sorry, I don't understand.
If you're overpaying at all then you're reducing the effective term.
What is your rationale for officially reducing the term with your lender rather than just leaving things be (i.e. the effective term is reduced but officially you're still on the original term)?
 
The general advice given on AAM is not to contractually reduce the term rather to voluntarily overpay an amount. That way if circumstances change you retain the flexibility to stop the extra payments. The effect is the same i.e., same cost in terms of total interest paid and the term is reduced.

Another factor to consider is your very favourable mortgage rate. You will save 2.15% on the overpayment . You could overpay but you could also save. With DIRT at 33% if you can find a fixed deposit rate offering more than 3.21% your money will be producing as good if not better net return for you. A quick glance at the fixed rate best buys suggests you would have a lot of options.
 
RedOnion said:
Just phone AIB and ask them to do it, and they'll send a form. Or alternatively they will send you a letter when you make an overpayment.
Because changing term is an amendment to the contract, I believe they need it in writing and signed.
It's very straightforward to do.
Click to expand...
@RedOnion
Will they write to you every time you make an overpayment ?
And must you complete an overpayment application form every time you make an overpayment ?
 
ClubMan said:
Sorry, I don't understand.
If you're overpaying at all then you're reducing the effective term.
What is your rationale for officially reducing the term with your lender rather than just leaving things be (i.e. the effective term is reduced but officially you're still on the original term)?
Click to expand...
I think you are mistaken Re if your overpaying you're reducing the effective term.
My reasoning.
It was €1077, end of mortgage is 2051.
Made loads of overpayments now monthly contractual amount is €1040, term is still the same 2051 end of mortgage.
If my repayment is €1040 and the interest rate stays the same throughout the term, i make no further overpayments
The term will not be reduced, i will be paying €1040 all the way upto 2051.
is that wrong or right what am i missing.
Thanks
 
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Pinoy adventure said:
Will they write to you every time you make an overpayment ?
And must you complete an overpayment application form every time you make an overpayment ?
Click to expand...
They won;t write to you if you overpay a fiver. I'm not sure the amount that triggers it, but any large overpayment you'll get a letter.
There is a default to reduce the repayment amount. You only have to complete a form if you want to do something different.
 
Pinoy adventure said:
@RedOnion
Will they write to you every time you make an overpayment ?
And must you complete an overpayment application form every time you make an overpayment ?
Click to expand...
Transfer via aib account directly into mortgage account no from neede, i dont give instructions, letter comes about 2 weeks later saying new repayment amount is now x amount. End term is still same.
 
New2024 said:
I think you are mistaken Re if your overpaying you're reducing the effective term.
Click to expand...
I'm not.
If you make accelerated repayments you are reducing the effective term of the mortgage.
It's simple maths.
Accelerated repayments mean that you are paying down the capital balance faster than if you are making just the scheduled repayments.
That means that the capital will be cleared faster than scheduled.
(I'm assuming that any additional amount over the scheduled repayment is being paid off the capital balance - some lenders may do this automatically, some may need to be told explicitly).
Any simple mortgage amortisation calculator will show you this.
 
New2024 said:
If my repayment is €1040 and the interest rate stays the same throughout the term, i make no further overpayments
The term will not be reduced, i will be paying €1040 all the way upto 2051.
is that wrong or right what am i missing
Click to expand...
You are absolutely correct of course.
If you only pay the new contractual repayment amount, the term stays the same.
Only if you continue to overpay (e.g pay the original 1077 per month) will the mortgage be repaid before maturity date.
 
ClubMan said:
I'm not.
If you make accelerated repayments you are reducing the effective term of the mortgage.
It's simple maths.
Accelerated repayments mean that you are paying down the capital balance faster than if you are making just the scheduled repayments.
That means that the capital will be cleared faster than scheduled.
(I'm assuming that any additional amount over the scheduled repayment is being paid off the capital balance - some lenders may do this automatically, some may need to be told explicitly).
Any simple mortgage amortisation calculator will show you this.
Click to expand...
Here's one:

Extra mortgage payments calculator - CCPC

Paying extra off your mortgage
www.ccpc.ie www.ccpc.ie
 
New2024 said:
I think you are mistaken Re if your overpaying you're reducing the effective term.
My reasoning.
It was €1077, end of mortgage is 2051.
Made loads of overpayments now monthly contractual amount is €1040, term is still the same 2051 end of mortgage.
If my repayment is €1040 and the interest rate stays the same throughout the term, i make no further overpayments
The term will not be reduced, i will be paying €1040 all the way upto 2051.
is that wrong or right what am i missing.
Thanks
Click to expand...
You are right about this. The letter you receive has the new calculations for the remaining term and remaining balance, which has been reduced by your overpayment. The new calculation states your new monthly repayment amount based on the above. The term hasn't reduced but the monthly payment has.

You can now decide to pay €1040 for the rest of your term, upto 2051. If you want to reduce the term, you will need to keep overpaying.

You say you want to reduce the term as you retire in 2050 but do you realise that reducing the term officially will increase your monthly repayment? You say you can't afford to overpay for 25 years but by reducing your term you are basically doing this anyway but you don't have the flexibility of pausing or stopping the extra.
 
New2024 said:
Transfer via aib account directly into mortgage account no from neede, i dont give instructions, letter comes about 2 weeks later saying new repayment amount is now x amount. End term is still same.
Click to expand...
@New2024
So if mortgage account is linked with your normal AIB current account you just transfer over any amount to the mortgage account?

If over a certain limit you get a letter and if smaller amount you don’t get a letter.

You don’t give AIB instructions to reduce term or monthly repayment,they just take off over payment from the mortgage balance is that correct ?
 
Pinoy adventure said:
@New2024
So if mortgage account is linked with your normal AIB current account you just transfer over any amount to the mortgage account?

If over a certain limit you get a letter and if smaller amount you don’t get a letter.

You don’t give AIB instructions to reduce term or monthly repayment,they just take off over payment from the mortgage balance is that correct ?
Click to expand...
Yes that's is accurate.
 
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