Overpayment on fixed rate

[Brego888]

What are the penalties and how are they calculated for paying a lump sum directly off the capital on a fixed rate mortgage? Do every bank calculate it differently or is there a formula.

We are in the process of securing a mortgage and looking at fixing with Ulster bank for 2 years at 2.3%. Issue is my partner is due to come into some money in the middle of next year (high 5 figure sum) when we should have already drawn down the mortgage. We hope to use this money to pay off some of the principle/capital of the property.

If the penalties for paying this during a fixed rate period are prohibitive we're unsure of whether going with a higher variable rate (2.9% with AIB) makes more sense to allow us to make the lump sum payment before possibly fixing at a later stage.

 

[skrooge]

Have a look at the sticky at the top of the main thread.

https://www.askaboutmoney.com/threa...nk-to-break-out-of-a-fixed-rate-early.204442/

 

[RedOnion]

Hi,

Have a look here, and let me know if you still have any questions and I can try answer more specifically:

https://www.askaboutmoney.com/threads/understanding-fixed-rates-breakage-costs.204427/

 

[WorstPigeon]

It’s also worth noting that UB allows you to repay 10% of the outstanding principal per year without penalty: https://digital.ulsterbank.ie/personal/mortgages/fixed-rate-mortgages.html

If it’s a fairly big mortgage, just spreading the overpayment over a few years might be a reasonable option (whether this would actually be cheaper than just breaking the fixed rate, or going with the AIB rate, would probably depend on the actual figures).

 

[JohnJay]

maybe you should look at getting your mortgage part fixed/part variable? Then you could pay off the variable portion with your lump-sum without any penalty.