Overpaying mortgage monthly re-payments

Discussion in 'The Fair Mortgage Rates Campaign' started by Donnie, Dec 20, 2016.

  1. Donnie

    Donnie Registered User

    Posts:
    29
    Hi all,

    Just looking for some advice on how to go about the below and also if it's worth it and what my savings would be.

    • I switched my SVR mortgage rate of 4.3% from KBC to Ulster bank about 6 months ago and am currently on the Ulster Bank SVR loyalty discounted variable rate of 3.1%.
    • My current outstanding loan balance is approx €353K and I have 29 years left on the policy.
    • I receive mortgage interest relief TRS direct debit each month and this is due to finish at the end of 2017 as we purchased the house in mid 2011.
    My questions are:

    1. Am I able to overpay my monthly repayments with Ulster Bank and if so how can I go about doing so? I would like to pay an extra €100 each month above the already agreed payment at the SVR rate 3.1%.
    2. What are the long term benefits if I do carry out the above and how will it reduce the outstanding principal capital balance?

    Any advice is welcome.

    Thanks,
    Don
     
  2. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    30,952
    Yes, you can overpay your mortgage. You could ask the lender to shorten the term, but then you would be tied in to the higher repayment.

    You are better off just setting up a standing order for it, and you can switch it off whenever you want.


    You have a mortgage of €353k , so the annual interest is €10,900

    If you pay €1,000 off that mortgage, you will save €31 a year.

    That is the best tax-free and risk-free return on your money.

    Brendan
     
  3. John4321

    John4321 New Member

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    1
    Ulster Bank have a good calculator on their website that will show how the over-payment will affect the term\reduce principal.

    I cant post a link but if you google ulster bank mortgage over-payment calculator you will find it.
     
  4. qwerty5

    qwerty5 Frequent Poster

    Posts:
    96
    Yes, it's worth doing. Every €100 is saving you €3.1 (roughly) a year so paying €100 will save you €90 in interest + reduce your mortgage by €100.

    Ring the mortgage line (it's on your documentation) and ask them for help. They'll give you the account to transfer money to and you use your mortgage number as the Reference number. Then you just set this account up as a payee on your online banking.

    Once set up it's very simple. You just transfer the money like you would to any other account whenever you want. Once you do that you'll see your next month repayment drop by a small amount.
     
  5. Donnie

    Donnie Registered User

    Posts:
    29
    Thanks all for your help.

    Can anyone confirm what the situation is with the TRS mortgage interest relief? We took out the mortgage in the summer of 2011, so does the TRS cease in Summer 2018 or at the end of December 2018?
     
  6. qwerty5

    qwerty5 Frequent Poster

    Posts:
    96
    If it was to end in 2018 it would have been in Dec.
    But in the recent budget they said it's to be extended beyond 2017. I'm not sure by how long. I think the plan might be to 2019 or 2020. They have to flesh out the details yet. I think they're doing that in the next budget.
     
  7. gnf_ireland

    gnf_ireland Frequent Poster

    Posts:
    634
    @Donnie There is a good site called moneysavingexpert.com that has a mortgage overpayment calculator in it. It supports the impact of both lump sum overpayments and regular overpayments. I cannot link to it as I am at work at the moment

    It is worth noting that you should always been the term of the mortgage the same, just in case you wish to reduce the level of payments at some point in the future for whatever reason. If you continue to overpay, the term will be reduced in any event.

    The thing to keep in mind is some banks work differently on overpayments. Some allow you to set your payment to x a month, say 1000 euro. Others allow you to overpay by x a month, so 100 euro a month. Its worth keeping in mind which option you end up with, as the second option will see your repayments drop slightly each month.
     
    Merowig likes this.
  8. Donnie

    Donnie Registered User

    Posts:
    29
    Hi all,

    I just want to revisit this thread to focus solely on the TRS mortgage interest relief. I have 2 queries which I am hoping people can assist with.

    1. As I stated above I switched my mortgage account from KBC to Ulster Bank in September 16. However I was receiving a monthly TRS amount of approx €202 per month with the KBC account but this amount has fallen to less than €100 per month when I switched to Ulster Bank. Does anyone know why this might be the case?

    2. As I said above we took out the mortgage in May 2011, based on the current legislation (as I know the government may look to extend this in next budget) does anyone know if my TRS is due to finish in December 2016, December 2017 or December 2018? My mortgage payment was made today in Jan 17, and it was a lot higher that previous payments because the TRS did not take effect this month

    Thanks,
    Donnie
     
  9. so-crates

    so-crates Frequent Poster

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    1,655
    Last edited: Jan 20, 2017
    Hi Donnie,

    I haven't done the calculation but the drop in your TRS is probably down to the drop in your interest rate. You were paying 4.3%, you dropped to 3.1% - have you calculated the impact on the TRS?
    Details on the TRS calculations are here http://www.revenue.ie/en/tax/it/reliefs/tax-relief-source-mortgage-rates.html

    As for how long it will be applied for, insofar as I know it is up to December 2017 for any property purchased between January 2004 and December 2012 http://www.revenue.ie/en/tax/it/reliefs/tax-relief-source-mortgage-rates.html
     
    Last edited: Jan 20, 2017
  10. Donnie

    Donnie Registered User

    Posts:
    29
    Thanks for your help.

    Sorry yes that's what it is. Obviously as the interest rate on the mortgage decreased, the TRS that I receive back decreases.