Key Post How overpaying a ptsb mortgage works

Hi Just to update this thread for those that are thinking of staying with PTSB.
I have a worked example to make it easier to explain.
I was comparing AIB @2.15% borrowing 300k over 30 years
And PTSB@ 3.00% borrowing 269k over 30 years.
If you go with PTSB and borrow 269k vs AIB (300k) you will end up paying 32k more in interest over the course of the loan with ptsb.
You borrow less but pay more in interest for less money due to higher interest rate.
That's the power of interest!!!
 
Hi, I'm thinking of going with this option and was wondering if I understood this correctly.
As an illustrative example, if I overpay by 1000 a month in a 5 year fixed mortgage I will have 60,000 built up in a credit account by the end of the 5 years.
At the point the fixed rate finishes can I then offset this 60,000 against the outstanding capital or does it remain in a credit account when the mortgage switches to a variable rate?
For simplicity imagine that there is 100,000 capital remaining at the end of the 5 year fixed term and I have 60,000 in my credit account. Can I then pay 40,000 to clear the remaining capital and close the mortgage or is this not a possibility?
Thanks
 
philanthropist9 said:
Hi, I'm thinking of going with this option and was wondering if I understood this correctly.
As an illustrative example, if I overpay by 1000 a month in a 5 year fixed mortgage I will have 60,000 built up in a credit account by the end of the 5 years.
At the point the fixed rate finishes can I then offset this 60,000 against the outstanding capital or does it remain in a credit account when the mortgage switches to a variable rate?
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Yes, you can offset the €60k against the outstanding balance.

Alternatively (even while you are still on the fixed rate), you can use the credit to take a payment holiday or to reduce the monthly repayments.

philanthropist9 said:
For simplicity imagine that there is 100,000 capital remaining at the end of the 5 year fixed term and I have 60,000 in my credit account. Can I then pay 40,000 to clear the remaining capital and close the mortgage or is this not a possibility?
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Yes, you can do that. You can even clear your mortgage while you are on the fixed rate but you may have to pay a break fee to do so. But the break fee is often low or zero.

Overpaying your mortgage might not be the best use of your money. Your priorities should usually be:
  • Paying off expensive debt (credit cards, personal loans, car loans, etc.)
  • Building up an emergency fund in a savings/current account (3 to 6 months' living expenses)
  • Saving money for any expenses you will have over the next few years (kids; buying a car; childcare; home renovations; adult children going to college, etc.)
  • Maxing out your pension contributions (very large tax relief is given)
  • Overpaying your mortgage
in approximately that order. Consider posting a thread about your situation in the Money Makeover forum.
 
I’m going to refix with PTSB - am I correct that I could use the overpayment to build up these credits (say to take a payment holiday in a year or two) and while these credits are around, PTSB will only charge interest on the net balance? So my monthly payments will have an increased capital repayment component? I find the PTSB brochure very unclear
 
This is still valid

Mortgage Overpayment Options | permanent tsb

Clear your mortgage sooner than originally planned using the mortgage overpayment. Regular payments and lump sum repayments available.
www.ptsb.ie www.ptsb.ie

Overpayment options​

  • Lump Sum Payment: If you’ve received a bonus or an inheritance or any other large amount of money, you can put that lump sum towards your mortgage to reduce your monthly repayments or the term.
  • Regular Overpayments: Regular overpayments are where you make an overpayment on your mortgage. This allows you to reduce the term of your mortgage and pay less interest overall or build up credit on your account to allow you to take a payment holiday at a future date.
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Is this wording correct? It says that the regular overpayments lead to a credit. But a lump sum payment leads to a credit as well, I think?
 
Here are the full details.


Payment Holiday Options

Underpayment

(i) The applicant may use a period where no scheduled monthly or other periodic repayment is made, provided sufficient overpayments have been made in order to provide for the payment holiday. In such circumstances, the overpayments will be applied towards the funding of the payment holiday.

(iii) This option is not available on annual interest, interest only, endowment or pension backed mortgages. ( Brendan's note: These are very old or very rare mortgages and I have deleted references to them in the subsequent conditions for clarity)


Overpayment Options

Lump-Sum Payments

(i) Lump-sum payments of any amount (where payment is made by cheque, the cleared funds) will be: (a) applied, at the option of the applicant, to reduce the applicant’s monthly repayments and to continue to repay the loan over the remaining term or; (b) in the case of annuity mortgages applied, at the option of the applicant, to reduce the loan term or; (c) credited to the mortgage account thus reducing the loan balance outstanding and either allowing the funding of future underpayments or payment holidays with overpayments.
(ii) Interest may be adjusted, in the case of monthly rest accounts, on the first day of the month following receipt of payment of the lump-sum and in the case of daily rest accounts, on receipt of payment of the lump-sum.
(iii) Where the lump-sum payment is made in respect of a fixed rate mortgage prior to the expiry of a fixed interest rate period, the applicant shall pay an additional sum calculated in accordance with the conditions relating to fixed rate loans as provided in general mortgage loan approval conditions applicable to the applicant’s mortgage. (Please see important information on ‘Fixed Rate Loans’ at the end of the terms and conditions).
(iv) In order to reduce the term of the mortgage or, the monthly repayment, from a lump-sum payment, the applicant must complete the appropriate section in the attached application form.


(vii) This option cannot be exercised in conjunction with underpayments and overpayments.

Regular Overpayments

(i) Regular overpayments may be made monthly or in respect of any other period as agreed with PTSB and of any amount.
(ii) The amount of an overpayment may be added to the scheduled monthly or other periodic payment and the total increased repayment will be deducted by direct debit. If no direct debit is in place the repayment arrangements for the overpayment must be made by the applicant in a manner satisfactory to PTSB.
(iii) All overpayments will be credited to the mortgage account and interest will be adjusted accordingly.

(v) The applicant must pay the loan by direct debit or standing order drawn on a PTSB account.
 
ptsb reserves the right to withdraw this facility at any time. And it's possible that the new owners, Bawag, might decide that they don't want to offer this anymore.

Termination

PTSB reserves the right to terminate the exercise of any flexible repayment option at any time, with or without notice, for any reason which PTSB, in its absolute discretion, thinks fit subject to applicable law.
 
I have a PTSB mortgage. Had variable for a bit and now fixed. You make a lump sum or regular payments above your monthly mortgage payment whenever you want. They go into the mortgage overpayment line of the account. This reduces the capital balance you see. The overpayment (lump sum or regular) sit in the overpayment and they earn interest and grow tax free at the same rate as your mortgage. You continue paying the same mortgage payment every month no matter what overpayment you have.

At any time you can fill out a form and move money from the overpayment line to reduce the term or capital. You can use some or all of the overpayment you've built up. If you reduce the term, the repayments stay the same. If you reduce the capital you get a letter a week later with an updated monthly repayment amount. If on a fixed rate your better off letting the overpayment grow and then when the fixed rate ends, fill in the form and either reduce the payment or term or do a bit of both.

The part that annoyed me a tiny bit is the form. You have to print, sign and post it to their mortgage headquarters which isn't very modern or convenient in this modern mobile app age. I found you can just sign the form and hand it into the local branch. They then post it to the headquarters. No they don't scan and email it as you'd think.

Personally I think it's a great hidden feature. It's almost like an emergency cash fund you can use to continue paying your mortgage if you have to stop working for a bit, etc.
 
Duddaa said:
The overpayment (lump sum or regular) sit in the overpayment and they earn interest and grow tax free at the same rate as your mortgage.
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I don't understand this. Are you saying that the overpayment amounts reduce the effective capital balance (like an offset mortgage) and you save via mortgage interest avoided that way AND the overpayment amounts also earn additional interest on top of that?
 
ClubMan said:
I don't understand this. Are you saying that the overpayment amounts reduce the effective capital balance (like an offset mortgage) and you save via mortgage interest avoided that way AND the overpayment amounts also earn additional interest on top of that?
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Yes I think so or at least that what it looks like to me. Last month I'd a little over 8k in overpayment. I didn't add anything to it but my overpayment total increased circa €25 euro over the month matching my fixed rate.

I'll have to have a closer look at the numbers to confirm but think so. It might be the way the numbers are presented in the app. I'm not great at working out compound interest but my overpayment definitely increases every month by a small amount when I'm not topping up with additional overpayments.
 
Thanks. I suspect that any overpayment amounts are effectively reducing the capital balance and thus saving on the mortgage interest due. I doubt that they're also earning deposit interest at the same time.
 
Brendan Burgess said:
PTSB reserves the right to terminate the exercise of any flexible repayment option at any time, with or without notice, for any reason which PTSB, in its absolute discretion, thinks fit subject to applicable law.
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Interesting. Possibly this right to terminate does not apply to existing mortgages, or mortgages drawn down before this change (if it is a change).

I drew down with PTSB earlier this year and the flexible payment option details were reproduced in full on the loan offer. Skimming the loan offer and conditions now, I don't see a right of variation on this part. I would expect that the flexible repayment rights apply for the duration of my mortgage, or at the very least for the duration of my fixed rate.
 
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Duddaa said:
Personally I think it's a great hidden feature. It's almost like an emergency cash fund you can use to continue paying your mortgage if you have to stop working for a bit, etc.
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Agree 100% but would add the bonus that it’s also DIRT-free and probably as high as, if not higher than, most deposit rates on the market. The only downside, in terms of emergency fund, is the relative lack of flexibility. Which can be overcome to a degree, e.g. use Prepayment credit to make monthly repayments, and then redirect monthly repayment amounts to whatever other financial emergency you have going on.
 
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Duddaa said:
Yes I think so or at least that what it looks like to me. Last month I'd a little over 8k in overpayment. I didn't add anything to it but my overpayment total increased circa €25 euro over the month matching my fixed rate.
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I suspect this is simply once-off “refund” of mortgage interest paid in the same month that you made the prepayment.
 
conor_mc said:
I suspect this is simply once-off “refund” of mortgage interest paid in the same month that you made the prepayment.
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I don't think its this. eg. I last made an overpaid in early August but the overpayment balance increased circa €21 in August (partial month), €24 in September (31 days in previous period) and €23 in October (30 days in previous period)

I've now sent an extract of the figures to ClubMan to review.
 
I assume the mortgage account and the overpayment account add interest every month based on whatever the mortgage rate is. So if you have 100k mortgage and 50k in the overpayment account (net owed is 50k) and the interest rate is 4%, after a year the mortgage account would show 104k and over payment account would show 52k (net owed is 52k) which would be correct. Those calculations are if you weren't to pay anything on the mortgage which you can't do but it is just for illustration purposes. So you aren't saving interest on the mortgage and earning interest on the overpayment account, it is just how they do the offset. It makes sense seeing as they are 2 different accounts. As I said though, this is an assumption based on what has been posted here. I could be wrong.
 
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