Can I make irregular over payments on my AIB mortgage?

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Feria50

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Obviously over payments in and of themselves have been well covered in this forum but I am finding the process cumbersome with AIB and am curious to know if the situation is the same with the other Banks. My situation is:

- Outstanding Mortgage of c.€164,000 with about 32 years remaining (of 35)
- Current variable rate of 3.4% with AIB
- Current house value of about €240,000 so If I stump up the €130 or so cost for an independent valuation, AIB will move me to a lower LTV band and provide a rate of 3.3% i.e. a saving of approx €100 per year.

Due to our relatively low debt, our repayments work out at just shy of €700 per month and we could easily afford to pay more each month.

I approached AIB with regard to flexible over payments (we would like to start of at about €150 extra per month) and they advised that this was possible. However the process is what I would deem pretty manual.

Each month AIB require me to send them a letter (signed by both me and my wife) authorizing them to debit an AIB current account by our requested amount and lodge it to our mortgage account. We both have to sign this form even though the extra funds are coming from my sole account.

If I set-up a standing order via internet banking, it only serves to reduce my monthly repayments going forward, rather than the capital (and term) of the loan.

I queried this further with AIB and they merely stated that they were not set-up to take over payments without manual intervention. I find this a little strange as I know that with variable rate business loans, any additional funds lodged against the loan automatically reduce the capital..

Anyway, the bottom line is that I find the business of completing this form each month silly. Is the situation the same with the other Banks???
 
Hi Feria,

I doubt that the AIB employee who gave you this information has their facts correct.

My husband and I have a mortgage with AIB which we overpay since drawing it down.We have increased the amount we pay monthly on two occasions. Both times, all that was required was a letter to the mortgage bank stating the mortgage account number and the new amount we intended to overpay by. AIB then debited by this amount

When our LTV improved, we did need to get a valuation in order to get the most favourable rate- currently 3.1%

There was never any mention of manual intervention.
 
Hi, my understanding is that the letter is actually a legal requirement. It has nothing to do with where the funds are coming from, but that you are changing your mortgage contract. I have made several overpayments on my mortgage with AIB, and the only time we both need to send a letter is when I want to reduce the remaining term of mortgage (i.e. where I want to repayment amount to remain unchanged).

Firstly, clarification. Any overpayments are repayments of capital - i.e. they reduce the balance on which interest is calculated. However, by default what AIB will do is reduce the remaining monthly repayments over the existing mortgage term. There is a reason for this - the only contract you have with AIB is to repay the outstanding amount over a specified term. If you want the existing repayment amount to remain after an overpayment, you are changing the end date in your mortgage contract.

From my own experience, if you want to make overpayments, you have a few choices:
1. Use online banking, and just make the transfers yourself. Note - you will receive a letter from AIB on each occasion as they recalculate your repayments. If you mortgage isn't already available on your online profile, you just need to call them and get it added. It takes a day or 2 for the repayment to be reflected in your mortgage account. Likewise, it should be possible to set up a standing order, but I've never done this myself.
2. Ask AIB to make a permanent reduction in the term of your mortgage. This way the change is permanent and they will automatically take the increased repayment amount. However, the change is permanent, and my understanding is that you lose the flexibility of reducing repayments in future.

Normally I've made chunky overpayments (i.e. more than a normal monthly repayment amount). You would need to confirm with AIB that if you make on overpayment of say 150 that they won't automatically treat it as a part repayment of the next month and automatically reduce that (some bank's systems are set up to do this, but I'm not sure about AIB).

Best of luck.
 
We had no such problems with Bank of Ireland just wrote to them saying that we wanted to pay x amount every month.

Paid off lump sums by lodging a cheque to their account and paid off the outstanding balance by bank transfer.
 
Plenty replies here, many thanks

What I'm looking for (and I don't think its covered above) is flexibility.

i.e. one month pay €150, next month €200, next month €0.. all depending on circumstances any given month.

From the lady I spoke with, this is possible with AIB but only in the sense that normal monthly repayments thereafter are reduced and the term remains the same. So I could overpay but my normal direct debit monthly repayments will constantly be recalculated and reduced in the background, leaving the term unaffected.

I certainly do not wish to permanently reduce my term via a new contract with the Bank and lose flexibility.

So in essence, is it possible to keep the normal monthly repayments constant (save for a rate change) and make monthly over payments of varying amounts with AIB or any other bank?
 
I think the only way you can maintain the flexibility you're looking for is by keeping your existing arrangement. However, as you overpay, it will have the effect of reducing the monthly payment as others have pointed out, as the balance has reduced, but the term has remained the same.

There's nothing to stop you from overpaying every month to either a) bring it up to the amount it originally was, or b) increase it over the original amount
 
Update

So I'm just off the phone with AIB and have been advised as follows:

1. Mortgage over payments received by AIB will not reduce mortgage term unless you send or email a letter requesting same on each occasion. This needs to be signed by all parties to the mortgage
2. If you do not send this letter, any over payments will be offset against capital AND interest accrued and thereafter your monthly mortgage repayment is recalculated
 
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