Can I withdraw mortgage overpayments?

[Churchstreet]

I took out a Mortgage for €155K in 2015. The repayments were €669.11/month over 27 years. In 2018,I had a lump sum of €40K to pay off it and I was offered two options by my lender. Option (A) Reduce the term to 17 years and maintain the repayments at €669.11/month (B) keep the term at 27 years and reduce the repayments to €487.76.

I replied that I wished to select option (B). However, I stated in the reply that I asked would it be possible to increase my monthly repayments to €800, and the difference between the new contractual amount (€800-€487.76= €312.24) be offset against the Capital. The idea being that if they didn’t wish to allow me to pay the difference off against the Capital, my mortgage account would be in Credit should I have difficulty keeping up repayments in the future (I’m self employed so wish to guard against periods where I may not have work)

I didn’t receive any reply except a receipt for the €40k. I noticed the first month after making the €40k, the repayment was €669.11, and then repayments increased to €800.

Now, I have since saved a further €16K which I wish to pay against the mortgage. I asked the Bank for a quotation for (A) reduce the term (B) reduce the repayments.

When I received the quotation and my Mortgage statement for 2018 (at the same time), I noticed that term had been reduced to 13 years. I haven’t spoken to the bank yet as I’m trying to get advice on this first, but I can’t see how they reduced the term of the mortgage without my consent?


Overall I wish to keep the term as long as possible so to reduce the contractual payment each month, so that if I’m not working at least my payments will be small and if I happen to have cash to pay off the mortgage I can do so, or keep the repayments accelerated or a bit of both.

 

[Brendan Burgess]

I think that ptsb allows this, but I don't think that the other banks do.

You have a choice - keep up the higher repayments and reduce the term - or keep the term and reduce the repayments.

You can't do both so it's not surprising that the bank reduced the term.

Brendan

 

[AlAndalus]

They can't reduce the term without your consent first and foremost so I think you need to write to them to advise them that you want the term to remain the same but that you still want to maintain payments at 800 per month. If you keep those payments up that will ultimately see the loan being paid off early. I'm not sure that most/any banks will allow you to subsequently 'withdraw' overpayments. It looks like they have been immediately applied to your mortgage account and used to reduce your outstanding balance. I suspect that they cannot be 'recalled' by you (or used as credit to be applied should you miss payments in the future). I think the best thing for you is to contact the bank about the term and ask them whether you will have the ability to withdraw overpayments (already made and possibly to be made)at some point in the future.

 

[RedOnion]

You can't do both so it's not surprising that the bank reduced the term

This is it exactly.

An annuity calculation can't increase the payments to 800 per month, and keep the term. So on their system they had to reduce the term to automate repayments at 800.

However, OP, unless you've contractually shortened the term, then the original term stands.

Your best option is to speak to the bank and work out clearly what your options are. If possible get the facts in writing in case you need to rely on them in future.

If you only took out mortgage in 2015, it's extremely unlikely you've a contractual right to draw the overpayment back down without going through underwriting process. Some older contracts with a small number of banks had this feature.

 

[AlAndalus]

They can keep the term as is and accept overpayments it will just mean that it is paid off earlier than the scheduled term. The calculator will tell you what your payments, at the current interest rate, will be until the end of term. If you advise them that you want to overpay by xx per month (as the OP has done) they can do this and the effect of that will be that you pay it off early. But they cant reduce the term without your agreement.

 

[RedOnion]

OP, which bank is your mortgage with, to avoid you getting incorrect advice here?