Best mortgage deal when overpaying?

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WorstPigeon

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I’ve currently got a 35 year 80-90% LTV variable mortgage with AIB, 33 years left, rate of 3.15%. My actual current LTV is 72% based on the valuation at time of purchase two years ago (I’ve no idea what it’s worth now), but AIB don’t allow LTV band changes.

Is this the best rate I can get? I’ve noticed that the advice around here now mostly seems to be to fix, but I’m overpaying fairly heavily at the moment, so I don’t think that would work for me. At current rate of overpayment, I’d expect the mortgage to be paid off in under 10 years (though obviously depending on future circumstances that might change), so under those circumstances fixing would cost me more in the long run, even if rates rise a bit.
 
A very interesting question.

One solution would be to switch to BoI and take the mortgage out over 10 years. So you would be automatically paying the mortgage off at the high rate. The problem with this is that you would be committed to the high payments.

Maybe take it out over 20 years with BoI fixed. Even then you are allowed to overpay by 10% a year I think.

Save any excess in a different account and pay it off in lump sums. The penalty for part paying a fixed rate mortgage should be very low for someone fixing now.

Brendan
 
Why not split the mortgage. Based on your current overpayments workout what you can pay in one year and fix the rest. But spread the fix amounts across the varies fixed options i.e, a little in a 1 year fixed, 2 year 3 etc.. The idea being just as you've finishing paying off the variable part the 1 year fixed segment is coming off its fixed rate and you cant start overpaying on that. This way you get all the benefits of a fixed rate (certainty on the payment) while having the flexibility of overpaying. You don't need to adjust your term and if circumstances were to change you are partly insulated against higher interest rates when compared to being all variable albeit not as secure if you had totally fixed. How bullish you want to be with this will depend on how much you want to overpay.

I'm not sure if all banks allow you to spread the fixed rate elements but its worth enquiring. From my read on the market AIB is obviously eye catching for variable rates but not great on fixed rates. BOI is the reverse. KBC are somewhere in the middle as in not bad on variable and fixed. They also offer a good mix of terms ranging from 1 to 10 years. From doing the calculations they would work out the best option for me but it is likely to be different for everyone.
 
I certainly wouldn't move to a 10 year mortgage. You really are screwed then if anything goes wrong and you can no longer afford the (expensive) repayments. Stay with longer term and overpay is the approach. How you do that is up to you. You should work out the net result of of 3.15% variable + your current regular overpayments versus %2.XX variable + limited 10% overpayment. Various online calculator should help here.

I think I saw on this forum that some people had success with asking AIB to allow them to move between bands, for the cheaper variable rate - perhaps ask them that, while saying you are going to leave otherwise?
 
I've fixed mine with Ulster Bank at 2.6% for 4 years. They allow 10% of an overpayment each year without a penalty. That's not something I need to worry about though. I can't afford 10%.

My plan is to dump a specific amount into a savings account and make one overpayments each year. My mortgage is over 200K so I've got to overpay by 20K before I'm penalised. I really doubt that's going to happen.

There's a bit of Excel work for you. I think your 3 options are.

1: Stick with a variable rate and overpay whenever you can.

2: Fix a portion of your mortgage and overpay the variable portion.

3: Get an account like mine. Get 2.6% fixed and overpay by 10% a year. Put the remainder into a savings account and then at the end of the 4 years put the savings account amount into your mortgage.
 
So Ulster Bank allow overpayment of 10% of the principal per year? I assumed it was like Bank of Ireland and they only allowed 10% of the normal payment. That could definitely work for me, then, must look into it. I wouldn’t be paying off 10% per year at the moment, though that will change in a few years as th principal gets smaller, if I keep up the overpayments.
 
Yeah. When I asked about it i they said it was 10% of the principle at the start of each year.
 
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