fixed rate - can I shorten term by upping payments?

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dubinamerica

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Hi - I fixed our residential mortgage with IIB for 5 years. I think the max lump sum that we can pay off is 10% of the loan amount. However, I was wondering if we can shortern the term of the loan by increasing monthly payments or have our payments been fixed as well as our actual rate?
 
If you have a fixed rate, then you are stuck with that for the term of the fix.
 
If you decide to break out of a fixed you will be liable for a penalty charge. Check with your mortgage lender as to how much this will be. You may well decide its not worth it.
 
I don't have a problem with the rate that I am fixed with at all - but does this actually fix the repayments also or can there be additional principle payments made on a monthly basis - at this same fixed rate? e.g. instead of having saving 30 year term can this be brought down to 25 by sticking to the fixed rate but paying extra back. Not sure if I'm phrasing my question very well on this !
 
You can only shotern the term, by paying more, once you have reverted to variable rate
 
As Ravima said fixed means fixed - in order to make any changes you will have to break out of your current fixed rate.
 
Does this then mean that the overpay facility, eg. make 15 repayments instead of 12 in a given year, is generally only available on tracker & variable products or am I looking at it the wrong way?
 
Yes - any accelerated repayment of a fixed rate mortgage will probably result in penalties. A lender is legally prevented from charging such penalties on variable/tracker rate owner occupier mortgages. This (lack of flexibility) is one good reason why fixed rates are a bad idea unless absolutely necessary (e.g. due to current or likely cashflow constraints).
 
My suggestion is to se tup a regular saving account using the amount that you want to over pay the mortgage by. A lot of banks are offereing good rates at the moment to entice people to continue to save after their SSIA has ended. When your fixed rate has ended, you can pay off a lump sum from these savings.
This is not as good as overpaying, but not a bad alternative in your circumstances.
 
Not quite correct. Some lenders - First Active and ICS spring to mind - allow you to prepay/redeem up to 10% of a fixed rate mortgage without penalty.

Alternatively you could split the loan into part fixed, part variable/tracker and make overpayments on the unfixed portion without penalty.

Sarah

www.rea.ie
 
Sarah W said:
Not quite correct. Some lenders - First Active and ICS spring to mind - allow you to prepay/redeem up to 10% of a fixed rate mortgage without penalty.
Click to expand...
I stand partially corrected. Thanks Sarah W - you learn something new every day!
 
was onto my bank (BOI) about same thing a few weeks ago.

I am currently on a fixed rate until Dec. '07

From what i gathered from Bank Manager:

i can pay upto 10% of amount left to be paid on mortgage in any one year.

and/or (not sure which)

i can make extra payments of €65/month

Obviously the (upto..) 10% lump sum has to be a great option, especially if paid while on the fixed rate. The term will have to decrease as you are paying more off the loan than originally predicted....
 
construct_06 said:
From what i gathered from Bank Manager:

...

and/or (not sure which)
Click to expand...
You should get such details in writing to avoid making a payment based on partial or incorrect information and ending up facing a penalty. Similarly put your intentions/instructions regarding capital repayments in writing and make sure to clarify the implications before they happen.
 
it seems to be the same with IIB - up to 10% lump sum payment I believe but could this be used by spreading over say a few years? I figured that this was a once off payment. I think that the idea of going with the regular savings is a good one - probably get a higher interest rate and then just pay off the lump when on variable after the (long) five years.
 
A key question here is why on earth would somebody who is presumably comfortably enough off with their mortgage that they can consider accelerating repayments have fixed in the first place - unless their circumstances have changed significantly since fixing!? One should generally only fix if one is hard pressed to meet the mortgage repayments or would be if rates increased by a few percentage points. Anybody else should normally opt for the most competitive variable/tracker rate available to them as it is much more flexible and, over the medium/long term, likely to cost a lot less.
 
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