EBS says that mortgage overpayments are held in credit. Do they reduce the interest?

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Opus2018

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Hi all,

I have a mortgage with EBS at 3.7% variable (I know, I should switch, but I can't at the minute!)

My question is if I make an over-payment to my mortgage account (keeping the figures simple say the over-payment is 100,000 Euro, do I save 3,700 in interest on an annual basis?

As the monthly payment is the same, I assume the interest principal switch improves by 1/12 of the interest saving per year, say about 308 euro per month? so if my payment was 1000 and 500 was principal say with 500 interest, then I'd move to 806 principal with 194 interest?

Grateful for all comments on this - I know you can get your money back as it it lodged as a credit in the mortgage account ( you apply in writing - both names needed if it's a joint account).

Many thanks,

Opus2018
 
Your monthly payment will not change automatically. You will need to provide written instructions to either reduce your monthly payment or keep the payment the same and reduce the term. However, such instructions will likely limit your ability to get this money back. I.e., you're committing this money to your mortgage this transaction cannot be undone

Assuming you opt to reduce the balance you will reduce your interest bill but remember your monthly repayment is made up of interest and capital repayments. By how much your monthly repayments decrease will depend on your current balance, your rate and how long is left in your mortgage.
 
Hi Skrooge,

Many thanks for the reply. The monthly repayment doesn't change so I imagine I am paying off the amount I save in interest as increased principal, yes? On looking at the account, I see that I am in credit (made a payment already) so my monthly payment is addressing this reduced amount, hence the increased repayment of principal.

Best,

Opus2018
 
2 comments:

If you can't switch away from EBS, you can still get a much better rate by fixing your rate.

In relation to overpayment, as @skrooge has said, EBS have a very strange system where they hold the overpayment as a credit until you tell them what to do with it. It's only then that they will recalculate the monthly repayment, or shorten the term (they back date it to the date of payment). Effectively yes you will save 3,700 interest in your example.
 
Hi RedOnion,

Thanks for this - as I understand it EBS credits your mortgage account let's say 100k so if you had 220k in there you are now paying interest and principal on the balance. So if you have a reduced balance of 120k, this is how you are saving on the interest as you are paying more off the principal. If you leave it like this you get the benefit of the interest savings but can still yank the money out if circumstances change. (You need to write into them to tell them to put it back in the account).

You raise a good point in relation to moving to a fixed rate, I'll give them a call - 3.15% is a decent enough saving alright.

Best,

Opus2018.
 
What you are describing is an offset mortgage - where credit balances reduce your interest expense but you can still access your credit balance. AFAIK these types of mortgages are not available with any Irish lender. I could be wrong but as I understand it your credit balance will not impact your mortgage until you instruct ebs to do something with it. At which point you lose the right to withdraw the funds.
 
Opus2018 said:
Hi RedOnion,

Thanks for this - as I understand it EBS credits your mortgage account let's say 100k so if you had 220k in there you are now paying interest and principal on the balance. So if you have a reduced balance of 120k, this is how you are saving on the interest as you are paying more off the principal. If you leave it like this you get the benefit of the interest savings but can still yank the money out if circumstances change. (You need to write into them to tell them to put it back in the account).

You raise a good point in relation to moving to a fixed rate, I'll give them a call - 3.15% is a decent enough saving alright.

Best,

Opus2018.
Click to expand...


Agree, you should call them. The situation as you understand it is not the case with EBS. You have to tell them explicitly before any action is taken and no interest reduction in the mean time. They have a 3.15% 1 year fix which would be beneficial. Why can't you switch?
 
I asked a branch manager about over-payments on my EBS mortgage last September. The following is copy and paste from the email replies I got:


Please note any payment will sit in the account in credit unless we get a signed instruction from you both confirming if you wish to use the Capital repayment to reduce your term or your repayment.


I then queries the interest calculation:


Yes any over payments that sit in credit will be deducted off the loan balance for the purpose of calculating interest.

For example your capital balance is 100k, you have 5k in credit, the interest is only payable on the 95k.

Hope this helps clarify the matter however please do not hesitate to contact me with any queries.
 
Hi Steelman,

That was my understanding - I'm trying to make contact with my EBS branch to confirm this again.

Hi also to itchy, You make a good point, and normally I would be all over this but I'm out of the country at the moment so it's going to be kind of difficult to switch (since 2016 I will have no record of income at home so who would take me on? I am working of course but I have a feeling any bank would be slow enough to take me as a switcher. The fixed rate at 3.15% is a good idea - I will ask.

Many thanks to you both,

Opus 2018.
 
Opus2018 said:
That was my understanding - I'm trying to make contact with my EBS branch to confirm this again.
Click to expand...

I think that you are making this very complicated.

Interest is charged on the outstanding balance.

If you have a balance of €220k at 3.7%, you will be charged €8,140 per annum (roughly.)

If you have a balance of €120k @3.7%, you will pay €4,440 interest.

If the interest charge is €400 per month and you make a repayment of €1,000, then you will pay €600 off the capital.

The following month you will pay interest on €119,400 (€120,000 -€600)

Brendan
 
Hi Brendan,

Many thanks for this. i just wanted to clarify if this was indeed the case and it is in the case of EBS.

Many thanks,

Opus 2018.
 
Steelman - Can you give a little more detail on the copy/paste email content above. I made contact with EBS last Friday & was told the opposite verbally. the branch? & date of the email? I've managed to amass 5.5K in "credit" which I thought was being taken off the mortgage for some considerable time, but only found out 3 weeks ago its sitting as "credit". They won't accept my intent was to reduce the capital and contradict your information above regarding offsetting the credit against capital for interest purposes. I hadn't received statements from them for some years so was unaware the money was sitting in limbo. Now it's my fault ....
 
Hi Kevin,

Just in reply to your posting. If like me you have a credit, while you are paying the same amount every month, the amount of interest you are charged is a bit lower (even allowing for the interest falling off due to previous payments on the mortgage). Roughly speaking you are saving about 17 Euro in interest every month due to the credit of 5,500 you have on the account.

Hope this helps, but if you have any queries on this do please let me know.

Best,

Opus2018.
 
Hi. Thanks for the reply.
I understand the use of the "credit" to reduce interest charges but the EBS are telling me they don't do that.
Ideally if Steelman would share the name of the branch (or privately the actual manager who states in email that they do or the email...)..I would have some evidence to contradict my local branch. At the moment I am stumped by having to accept that they say they don't allow credit to reduce the interest. They make /break the rules to suit themselves? Anyone point me to the EBS small print that states that credit redemption must be in writing "expressed intent". Everyone seems to only hear about this AFTER they've intentionally or unintentionally amassed credit.
 
Are you able to look at your mortgage statement and calculate what the interest charged should be and what they actually charge you?

I think you should try to check it yourself. If the figures don't work out and it is a bit difficult, then send in a written request to EBS and ask them to give a breakdown of the calculation of the interest figure of €1,456.37 charged on 31 March.

Brendan
 
It was from Swords branch of EBS in October 2017.

I was told by email


Yes any over payments that sit in credit will be deducted off the loan balance for the purpose of calculating interest.

For example your capital balance is 100k, you have 5k in credit, the interest is only payable on the 95k.

Hope this helps clarify the matter however please do not hesitate to contact me with any queries.
 
Hi Brendan,

Good advice - you could also ring them up and ask for a capital/interest split for the last few months. They were happy enough to give this to me over the phone, to be fair. It was easier to see for me the change over time given the figures involved. Also, the advisor in my EBS branch told me the interest bill would go down if I made extra credits and I recall this was a policy of long standing. Incidentally, if you have online banking, there's nothing to stop you putting more credit in via this route (this is how I did it) , but I understand that you would want to be sure of the benefit to you first.

And yes, the interest rate has gone down to 3%. The conversation started before the rate change, hence the confusion.

Best,

Opus 2018.
 
Hi Steelman & OPUS2018;
Another frustrating day today. Presented the Local Branch Manager & "mortgage master" with the above detail from the Swords branch & he's now declined to correspondence! instead instructing me to use Customer Care & Social media to find answers to my questions. I'll make no comment on that, for now... other than I'm surprised that a man that "loves most about the job, he’d tell you it’s connecting with people and giving them the advice that’ll see them home under par".... might need to review the definition of love.... ...
So.. I am still awaiting a reply from the loan's investigation team (for over 3 weeks now).. and have asked customer care to add the refusal/reluctance of the "Mortgage Master" to engage and provide information to an existing customer, to the on-going Formal complaint.
Can anyone point me toward a website/document/other? that states publicly and transparently that credit can only be applied to the principal, if that is expressly stated as the intent in writing by the customer, and also where it is stated that interest is offset OR is not offset, if a credit exists? In my experience of the last 3 weeks, this information is only made known AFTER a customer builds credit and asks why it is not being used , as the customer intended.. but didn't know they had to write a letter stating that intent.
 
Hi KevinOBB,

That's annoying alright. The only think I can think of is to ring the branch and ask for a split of the capital and interest payment since when you went into credit. I checked again on my online account now and can tell you that the interest payment is a LOT lower than say last year and this is down to agressively putting extra money into the mortgage account which then shows as a credit. I imagine that because the figure you quoted is a little smaller, the amount of interest saved is correspondingly smaller and therefore a little more difficult to spot. A quick calculation would suggest the following:- (5,500 * 0.037) = 203.70 savings in interest annually which equates to just under 17 euro a month. Qne question - the credit IS in the mortgage account itself? You'll know from the last annual statement if you're account is in credit or not..

Hope this helps,

Opus2018.
 
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