EBS allows mortgage overpayments to be left as a credit

Discussion in 'Mortgages and buying and selling homes' started by dovetail, Apr 18, 2017.

  1. dovetail

    dovetail Registered User

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    Hello.
    Q1. I've made a lump sum over payment to my mortgage account. I contacted EBS who said that 'this will go as credit on your account until you instruct us Verbally or by writing to take it off the Principle(Repayments) or the Capital (Term). Once you restructure the loan, that is the new terms of the loan'.......This is the first time that I have made an over-payment and wanted to check here that I give the EBS the instruction that is best for me. Should I instruct EBS to take this lump sum payment off the Principle or the Capital? or can I just leave it as a credit on the account?
    Q2. Depending on surplus cash at the end of each month, I am considering to make regular monthly overpayments . if I do this, would I have to contact the EBS each time to give them an instruction of how I want the overpayment allocated?
     
  2. Brendan Burgess

    Brendan Burgess Founder

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    Are you quoting from what they actually said in writing? It's very strange to differentiate between Principal and Capital.

    In any event, the correct thing to do is to reduce the Repayments and not the term.

    Brendan
     
    dovetail and Gerry Canning like this.
  3. dovetail

    dovetail Registered User

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    Thank you Brendan for the reply. I'm clear on what I need to do now! (yes, I had contacted them by Email, and that was a direct copy and paste quote from their reply!).
     
  4. Brendan Burgess

    Brendan Burgess Founder

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    OK, so it was an email rather than a public document.

    Sounds like a credit on your account might be the way to go then.

    You will be charged the same interest i.e. on the net balance of the account.

    But you will be in credit (the opposite of arrears) which means that if you ever need to take a payment break, you can do so.

    Brendan
     
  5. dovetail

    dovetail Registered User

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    Just so I am clear (just getting to grips with how the mortgage account works)...You are saying that in this case is it better that I do not instruct the bank to allocate the over payment on my account against the repayments. just leave it as a credit on the mortgage account? would this still mean a reduction in overall interest applied for the period that I leave the credit there? (so in theory it is currently better to leave any surplus cash in the mortgage account as opposed to accumulating in any term / regular savings account )
     
  6. Brendan Burgess

    Brendan Burgess Founder

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    Yes. If EBS gave you this option, then that is the best option.

    Brendan
     
  7. dovetail

    dovetail Registered User

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    Last edited: Apr 21, 2017 at 5:16 AM
    If my line of thinking is correct: the credit balance on my mortgage account generates a saving on mortgage interest paid(@3.3%). this would be the equivalent of putting the same amount into a savings account that would pay 3.3% interest (which does not exist), and further savings are to be had because the DIRT element that would be otherwise applied to interest earned on savings......does my line of thinking tally up?
     
    Last edited: Apr 21, 2017 at 5:16 AM
  8. Tebbit

    Tebbit Registered User

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    Does this mean if you put savings in as credit on your mortgage account you can withdraw the money whenever you like??
     
  9. Monbretia

    Monbretia Frequent Poster

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    That all depends on the lender, some used to allow future withdrawal of the credit but these days I'd want that in writing from them before depending on it :)
     
  10. dovetail

    dovetail Registered User

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    EBS replied back to me by email and said 'Any credit on a Loan can be withdrawn.'.....do you think an email is enough to cover me, or I should ask them to send confirmation on headed paper by post?
     
  11. Brendan Burgess

    Brendan Burgess Founder

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    I would be astonished if it could be withdrawn. But if you have an email to that effect, then you will have a good case.

    However, I believe you could take a mortgage holiday to "use up" your credit.

    Brendan
     
  12. letitroll

    letitroll Registered User

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    If you could get further clarity on this it would be very interesting to understand whether this is standard ebs mortgage policy
     
  13. Monbretia

    Monbretia Frequent Poster

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    It's hard to know what sort of a guarantee you could get from them that you could rely on, even if it's policy now to allow withdrawals of credit on mortgages they could change policy at some stage in the future.

    The email is probably as good as it gets and can at least be an argument if you ever need to do so.
     
  14. Mousehelp

    Mousehelp Registered User

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    Surely if the Account is in credit, there is no change in the loan (mortgage) and hence no change to the monthly repayment/term. Otherwise, we could all use the mortgage account as a high interest saving account?

    My understanding is that the credit facility is just a 'holding' until you decide whether to use The money to reduce monthly payments or reduce the term - But does not gain interest or the loan is unchanged until the final decision is made?
     
  15. Monbretia

    Monbretia Frequent Poster

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    Not really, depending on the particular bank system but usually a credit is saving you interest as your interest is being calculated on the net outstanding balance so while the terms of the loan remain unchanged until you instruct that you want your term or repayments changed it still saves you interest.

    I'm not sure how many banks offer this facility anymore and yes lots of people did use it to save interest in the past which did effectively make it a high interest account if you were paying a high rate on your mortgage then you were then saving that amount in interest charged.

    It's actually the same theory as an offset mortgage but an unofficial version if you can get it.
     
  16. dave2015

    dave2015 Registered User

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    Rang UB and they put any overpayment against the balance and not viewed either as credit or as refundable in any way. I try pay something monthly. Might have good case for a holiday if I asked formally but don't need it, was just curious. That's what I had anticipated but before any overpayments I think wise that you are fairly certain you wont need it for any other reason and have a good rainy fund in place despite miserable interest rates unless you get the above guarantee in writing from your bank.