Overpaying Mortgage

I've two questions.

I've been overpaying my EBS variable mortgage (3.7%) for the last few years. There's 15 years left on it - to 2034, as it goes to age 75 as I'm self-employed. However, as I'd really like to be mortgage free as soon as possible, I've been overpaying so that by the time I get to 65 there should be only a small amount €40,000 (!) left, which I can either pay off in much smaller amounts for the next 10 years or, if my investments do well, I can almost pay off altogether in a lump sum.

But I was in the EBS today looking to put a lump sum into the mortgage and the person behind the counter said to me that what I've been overpaying is "just sitting there as a credit" and not as "redemption".

1. I don't understand - what's the difference?

According to the Annual Statement that I got the other day, if I continue to pay the same amount as I have been, the loan will mature in 2029, so about 4.5 years early.

2. The other question is, would it be worth my while to fix for a year (can't do longer than that as too many changes coming up in my life) to the EBS 3% rate. I know I could go for the Ulster bank at 2.5% but I don't see them giving me the same length on the mortgage which gives me some wriggle room should business go down the tubes. The plan would be, if I fix, to put the overpayment into a savings account and at the end of the fixed period, put that amount into the mortgage as a lump sum. Does this make sense?

We also overpay our mortgage and were told the same thing as the bank. For e.g. I overpay by approximately 200.00 per month. Unless I give an instruction to the bank, that 2400.00 annually effectively sits on the account as a prepayment. Interest is charged on the mortgage less this amount. If for e.g. I lost my job and was unable to pay for a few months, they would draw off this prepayment without us going into arrears. If you want the bank to take this off the capital as you overpay, you need to give an instruction to the bank. I decided to leave things the way they are as it gives me a little bit of flexibility. I feel like I'm getting the same benefit the way I'm doing it (no interest charged) unless someone who knows more than me can tell me differently!

In relation to the fixing, I will leave that answer to someone else.

EBS have an unusual process.

This has come up previously, and the following thread might help:

https://www.askaboutmoney.com/threa...in-credit-do-they-reduce-the-interest.207269/

Nutso said:

Interest is charged on the mortgage less this amount.

Click to expand...

I’d double check that if I were you!

Hmm interesting. I've just read the thread re: EBS. Ours is with PTSB and the information I got was over the phone several years ago. In light of the banks' recent behaviour in relation to trackers etc, it would probably be a good idea to get this in writing.

Thanks, RedOnion, that's interesting all right. So I can get them to lodge it against the mortgage, as 'redemption' and the situation continues as I thought it was doing! I don't need access to that money, I thought it was going against the mortgage. Very useful thread indeed.