How to make an overpayment on a Fixed Rate mortgage

[FrankLloyd]

I was a little hesitant about entering another fixed rate period because of the 10% limitation on over-payment while on a fixed rate, and the person I spoke with explained to me that I could pay the fee and break from my current fixed rate, once I was on a variable rate I could then increase my payment to whatever I wished, and then elect to go back on a fixed rate of 3% for 3 years and the bank are obliged to accept my payment level at whatever it was when I was on a variable rate. Apparently, I don't even need to make a payment while on the variable rate - as soon as I get the paper work saying I'm now on a Variable rate I can increase my payment and then the next day say I want to go back on a Fixed Rate.


J.

 

[Brendan Burgess]

This is an interesting issue - so I have moved it from another thread.

If you want to make an overpayment on a fixed rate mortgage, ring the lender and check the break fee for breaking out of the fixed rate. In many cases, it will be smaller than you expect or even zero. In most cases where there is a fee, you will recover it quickly in the interest saved.

In this case, Frank was quoted a fee of €3,000 on a €200k mortgage balance with 2 1/2 years to go @4.15%

By overpaying €200k , he would save €20,750 (200k @4.15% for 2 1/2 years), so it would be well worth doing.

1) He could just overpay €20k , and would save €2,075 at a cost of €300.
2) He could break out of the fixed rate completely and go variable. When it's variable, he can pay whatever he wants without penalty.
3) As this was a Bank of Ireland mortgage, he would be facing very high variable rates, so he would have to either fix again, but at a much lower rate or else switch to another lender.

Brendan

 

[lledlledlled]

Another option may be to fix a proportion of your mortgage, and leave the rest on a variable rate. The latter proportion will have no restrictions in terms of overpayments.