Mortgage overpayments and loan term

Discussion in 'Mortgages and buying and selling homes' started by Blossom, 3 Jan 2019.

  1. Blossom

    Blossom Registered User

    I’m probably missing something here but I’m sure AAM members can help me.

    We have a 20 year mortgage which we took out in 2009. We overpaid our mortgage repayments for 15 months and also added one lump sum. These payments were deducted from the principal/capital of the mortgage.

    For the duration of our additional monthly payments it was stated on our annual loan statement that the loan was scheduled to mature at a date much earlier that than 2029 (2020 I think).

    Of course, I understand that that date would change once we discontinued our additional payments. However, I note on our annual loan statement, that since we stopped the additional payments, the date that our loan is scheduled to be repaid is once again the same date in 2029.

    I know that by making the additional payments we will be paying less interest on the loan overall but should it not mature at an earlier date also?

    I’m usually ok at this sort of thing but just can’t get my head around this one so any input will be much appreciated.
  2. Blackrock1

    Blackrock1 Frequent Poster

    Did your repayment amount (excluding the overpayments) stay the same or has it decreased?
  3. Blossom

    Blossom Registered User

    Our repayments have stayed the same (depending on the variable rate). We're with the EBS.
  4. Brendan Burgess

    Brendan Burgess Founder

    Hi Blossom

    Let's say you have a mortgage of €100,000 at 3% with 20 years remaining.

    Your monthly repayment will be €554.

    If you pay a lump-sum of €20,000, you will be charged interest on €80,000.

    You will be given a choice of reducing the repayment to €443 or
    Keeping the repayment the same and reducing the term to 15 years and 4 months.

    If you just overpay without giving them any instructions, you will automatically reduce the term but their system might base it on the scheduled repayments, rather than the actual repayments.

    If some event happens e.g. an interest rate rise or you give them an instruction, they will then recalculate the repayment and the term.

  5. Blossom

    Blossom Registered User

    Many thanks for your reply, Brendan.
    When we stopped the overpayments we instructed them to do so in writing and notified them that we were reverting to the normal monthly payments. We didn't ask them to recalculate the term but I shall call them to do that now. A number of interest rate changes have happened in the meantime and they haven't recalculated the term. I'll see how I get on.
    Many thanks again.