Overpayment Flexibility Confusion

[tvpcork]

Hi there, often banks boast about their overpayment features but the wording on them can be very unclear.

For example, ICS state "customers can pay an additional 20% off their fixed rate mortgage without penalty in any 12-month period". Does this (a) mean 20% of the mortgage capital balance or (b) just 20% of the monthly repayment?

For example on a €200,000 mortgage, option (a) would mean an overpayment allowance of up to €40,000 on year one vs a few hundred euro per month with option (b).

if anyone is familiar with this and can provide clarity that would be appreciated as there is a huge difference between the two scenarios.

 

[Brendan Burgess]

It is A.

A mortgage means the amount of money which a person owes. So their mortgage is €400,000.

Many people mistakenly refer to "their mortgage" as the amount they pay each month. When I ask people "how much is your mortgage?" , I would say that half reply "€1,200" - meaning their mortgage payment.

So now I ask "how much is outstanding on your mortgage ?" or "what is your mortgage balance?" but even still I would often be told "€1,200" , as that is the only figure most people know.

ICS should reword the above to
"customers can pay an additional 20% off the balance outstanding on their fixed rate mortgage without penalty"