Mortgage overpayment

[MTMH03]

Apologies in advance that this is a bit of a long story but I am at a loss about what to do.
In 2017 I fixed my mortgage for 3 years, at an interest rate of 3% (I originally drew down my mortgage in 2011). My monthly repayment was €976.29. In August 2018, I paid €10,000 into my mortgage account and the same month I arranged to make a monthly overpayment of 10% (this is the maximum overpayment allowed) I was informed that this would then bring my monthly payments to €1073.91.
In March 2020, I made a further €25,000 deposit into my mortgage account. The following month my monthly payment was the same. It was at this time that I was speaking with someone and they questioned why my monthly repayment had not gone down since the principle was now less.
I contacted BOI and they said that they had just presumed that I wanted to continue paying the same amount per month (even though this would now be a €340 overpayment instead of €97. 60) so I agreed to do this because it would mean I was paying off more of my principle per month. After much perseverance, I did manage to get this acknowledged in writing from the bank.

Later, on further review, I discovered that BOI had not readjusted my monthly repayment after my €10,000 lump payment either (which means I had been paying more than a 10% overpayment) and I have been overpaying since then.

My fixed term has now ended and I am defaulted to an interest rate of 3.9%. I have written to BOI 3 times to try get them to review my situation and they are not acknowledging their original error in not reducing my monthly repayment following my first lump sum payment and will not engage with me at all. Their responses just keep telling me that if I still have an issue that I should go to the Ombudsman.
At this point, I am unsure how to even go about calculating the money I am now owed by the bank and how much my mortgage term should be reduced by because of the overpayments. Is there anyone who has any idea about how to go about calculating this?
It is also not apparent from their calculations on the statements how my monthly €340 overpayment is bringing down my principle per month. I am not sure how to work this part out either.
Has anyone any experience with the ombudsman in cases relating to complaints relating to mortgage lenders?
I would be very grateful for any advice!

 

[Brendan Burgess]

I am not really sure what your question or complaint is.

There are two issues - the interest charged and the amount paid.

Assuming that they charged the correct interest, then the overpayment is not a big issue.

Let's say that you overpaid by €10,000. Your balance today is €90,000 instead of €100,000. So if you get BoI to agree to their mistake, they will refund you €10,000 but your mortgage balance will rise to €100,000.

I am unsure how to even go about calculating the money I am now owed by the bank and how much my mortgage term should be reduced by because of the overpayments.

So this is sort of irrelevant. If the bank pays you the money it "owes you " your balance will rise.

As someone who seems to have large amounts of cash, you presumably don't want this.

 

[Brendan Burgess]

The big question is what interest rate are you paying?

How much is your mortgage?
What is the value of your house?

You should consider switching to a much cheaper lender. For example, Avant.

Brendan

 

[MTMH03]

Thanks for your reply Brendan. Apologies, I obviously wasn’t clear about my issue.
When I did the first lump sum payment of €10,000 BOI acknowledged the lump sum itself but never decreased my monthly payment thereafter to reflect the smaller principle. For example, if I use the calculator on their website now, following my lump sum payment, my monthly repayments should have gone from €976 to €898.17. Whereas I had continued to pay €976 plus the 10% monthly overpayment of that amount which ended up being €1073 instead of €987.98. This has continued to be the case for the last 2 years. BOI will not acknowledge that it was an error that they did not decrease my monthly payments at that time. For my lump sum payment this year, they had also failed to decrease the monthly repayment until I contacted them and questioned them about it. Anyone else that I’ve spoken to that has made overpayments with other banks, it seems routine that their repayments are adjusted and reduced.

 

[Brendan Burgess]

As I have tried to explain, this does not matter.

Do the €10,000 and the €25,000 appear on your statement?

If they do, then BoI is charging you less interest , so you are not losing out

You are just paying off your mortgage quicker than you would otherwise have been. And that seems to be your plan anyway.

Brendan

 

[ginslia]

When you pay a lump sum off your mortgage - there are 2 options - either you want to:
- reduce the term (pay your mortgage over a shorted period) or
- reduce your monthly payment (pay less each month over the same original time period).
If you don't specify which of these options you want, the bank will usually have a default [never used BOI, but UB's default was lower payments]. So if you are checking with the bank, get both your balance and the remaining term, to determine if they have recorded your repayments as you wished.

 

[tommygirl]

Not sure if similar but requested AIB to fix repayments at a set amount in the past and was only given an option to reduce term to correspond to the repayment I requested (not on a fixed rate). On querying this I was advised that previously repayments could be fixed but no longer done as if interest rates rise there may be a shortfall and the fixed repayments are set and it might not be noticed. Fixed repayments would not change unless someone manually changed them.
Could something similar have happened here? Maybe BOI setup the 10% overpayment this way? The lump sum payments did not trigger a change in repayments due to the repayments being fixed.
Do BoI allow 10% overpayment? If you paid over 10% are you not lucky that you weren't charged a break fee for the extra?