Paying Lump Sum off Mortgage with UB

I have a few questions about this. I would like to use my savings to pay some money off the mortgage.

1. Not really sure how I go about it. Do I just send them a cheque with the account details?

2. Also should I ask them to reduce the capital but keep the term of the mortgage the same or should I ask them to keep the repayments the same? Do not understand the difference between the two options. Would be grateful if someone could explain it to me.

Thanks

What I did was to make it an "out of course payment" to my mortgage account. I specifically told the person at the hatch in the bank, that this was how I wanted to make the payment.
Otherwise the loan would have been restructured with lower payments and the term of duration would have remained the same.

muinteoir said:

2. Also should I ask them to reduce the capital but keep the term of the mortgage the same or should I ask them to keep the repayments the same? Do not understand the difference between the two options. Would be grateful if someone could explain it to me.

Thanks

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This is probably easier to explain with an example (this is generic across all Bank's - I'm not sure what UB's default treatment of a lump sum is)

Take a 200k mortgage at 3% over 20 years.
My normal repayment amount is 1,109 per month.

Now, I want to repay 20k early. I've 2 options;
1. Reduce the term, and keep repaying the 1,109 per month, or
2. Keep the term at the remainder of the 20 years, and have a smaller monthly repayment.


If I go with option 1, it will reduce the term to 17.5 years. The mortgage will be repaid 2.5 years early, and has the lowest total interest cost.
With option 2, the monthly repayment reduces to 998 per month (so I've an extra 105 per month), but I've paying interest for a longer term.

Note: if you choose option 1, it is a permanent change to your contract. If you come under financial pressure in the future the bank will not automatically extend the term back out to what it was originally.
Option 2 gives you more flexibility, especially if you are disciplined enough to continue saving the extra 100 per month, and make further lump sum repayments. Or set up an additional standing order that you can cancel anytime you want.

If you make different lump sum repayments over the course of the mortgage, you can choose different treatments for each one.

Edit: I just realised there's really nice calculator tool on the UB website, with a graph.
http://digital.ulsterbank.ie/personal/mortgages/secure/mortgage-overpayment-tool.html

There is also an option 3. Keep the term and the repayments the same. The mortgage will be repaid earlier and you will have the flexibility of lowering the repayments should you need to.

Specifically with UB you can make a payment by EFT. If you ring the mortgages section they will give you the BIC and IBAN of an account that you can make a transfer to. All you then have to do is ensure that the Mortgage Account No and Name on the Account is included in the Comment section.

I did this earlier in the year and the payment itself was painless. What was not painless however was that UB decided unilaterally to reduce our monthly payment rather than the term. One purposeful phonecall followed by a sharply worded letter and this was resolved to our satisfaction.

tallpaul said:

I did this earlier in the year and the payment itself was painless. What was not painless however was that UB decided unilaterally to reduce our monthly payment rather than the term. One purposeful phonecall followed by a sharply worded letter and this was resolved to our satisfaction.

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Why sharply worded? Is it not standard just to reduce the payment? I've had a mortgage with two companies and with both all they did was reduce the payment per month if I overpaid. It's what I prefer and I presume if you don't tell them in advance they have to choose either reduce the payment or reduce the term. Reducing the term sounds more complicated to me and isn't something I'd want them to default to. Fair enough, that wasn't your preference but it's not something to get annoyed about. I'm sure they changed it to your preference with little hassle.

Not sure why you felt the need to drag this up after three weeks?! In any event I suppose context is everything. Sharply worded because earlier in the year UB mortgages had made a litany of errors on amending our monthly payment, so much so that they rang me personally to apologise. Hence when they did not carry out our wishes again, I wrote to them. Sharply worded as it turns out.

In any event, I'm not sure that is 'standard' to reduce the payment. It certainly isn't advantageous from a mortgage loan duration aspect and which benefits the bank with more interest over time. This is why they default to it I assume.

tallpaul said:

In any event, I'm not sure that is 'standard' to reduce the payment. It certainly isn't advantageous from a mortgage loan duration aspect and which benefits the bank with more interest over time. This is why they default to it I assume.

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It appeared in my feed. I didn't realise it was old.

I'd have assumed that changing the date on my mortgage would require signatures and a contract change, whereas changing the repayment amount is going to fluctuate and probably contracted in. I could be entirely wrong though.