Reducing capital - Lump sum or Monthly payment?

G

gregor

Guest
Hi There

Now that the SSIA has finished I have a lump sum that I want to put against the capital on my mortgage. In addition we now have €500 monthly that we want to put against the mortgage too.

Question - Is there any financial benefit in decreasing the term by using the additional €500 to increase our monthly payments? OR are we better off leaving the term as it is and making an annual lump sum payment? OR is there any difference at all in the way that the bank calculate it?

At this stage I'm so suspicious of the banks that I'm concerned that they'll have some way of clawing back the lost revenue as a result of us paying off our mortgage earlier!! - Any advice much appreciated.

G
 
Check your terms and conditions of your mortgage first . then if there are no penalties in your agreement,pay the lump off in one go ,and if you want to up your monthly too thats the best way to maximise its effect.AfAiK.
 
As setemupjoe says check the terms and conditions, including how often interest is calculated. A variable rate mortgage secured on your home should contain no early redemption penalty clauses.

If there are no sneaky clauses and it's an "EITHER/OR" situation with you, you should pay monthly rather than waiting to accumulate an annual lump sum. If you pay monthly and your interest is calculated daily or fairly frequently, you'll get the benefit of one capital reduction every month, instead of wating until the end of a year.

Liam D. Ferguson
www.ferga.com
 
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