AIB says it's not possible to reduce the term of a fixed rate mortgage?

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villafan

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Hi all,

I am on a 5 year fixed with AIB at 2.55, 2 years remaining on it. I rang and asked about breakage fee (ERC) a few months back and was told it would be 0.

I’ve some savings built up and decided to pay off a lump sum overpayment last week and reduce the term of the mortgage. Today I received a letter from AIB which I presumed would be a similar one I received previously giving me my new term date - instead I received a letter stating that it’s not possible to reduce the term on a fixed mortgage and my repayment amount is being reduced instead and if I want to reduce the term I will have to break out of the current interest rate and apply for a new interest rate.

I’ve never heard of this, I’ve looked through some forums and i think they are wrong. Can anyone provide some advice before I ring them please.
 
Hi Brendan,

I think I got a reduction of about 80 euro a month, but paid off 15k. Over 2 years I’d only have about 2k extra in my pocket. With going onto a higher interest rate in 2 years which will eat into the lower amount I’m repaying, have I effectively lost all the money I paid off?
 
I don't follow your line of reasoning, but no, you have not lost any money.

Your decision to make a capital repayment was correct.

You have saved €80 a month, but you also owe a lot less.

Brendan
 
Think I’ve completely misunderstood, thanks for your advice. So I should be happy enough with the monthly saving and then in 2 years I can reduce the term to whatever I want with a new interest rate or even change providers and dictate the term I want??
 
villafan said:
Today I received a letter from AIB which I presumed would be a similar one I received previously giving me my new term date - instead I received a letter stating that it’s not possible to reduce the term on a fixed mortgage and my repayment amount is being reduced instead and if I want to reduce the term I will have to break out of the current interest rate and apply for a new interest rate.
Click to expand...

This seems to contradict what their webpage says:
Reduce your mortgage term by paying a lump sum payment, completing the relevant information on the Overpayment form and selecting option b)
Click to expand...

Did you use the overpayment form or did you do it another way?
 
No didn’t use the overpayment form, I wrote a letter, outlining I wanted to reduce the term of the mortgage
 
Pay your lump sum now. Then your monthly repayment will drop (they will send you a letter telling you your new monthly repayment).

As long as you keep paying the same monthly payment you currently have now before your lump sum, it will work out the equivalent to reducing your term in the end
 
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