Overpayment / re-fix flexibility of AIB's green 5yr fixed rate (and some other rates)

[The Oggster]

Sorry I wasn't clear. Your repayments have reduced. I would like to use my over payment to reduce the term and keep my repayments the same. To do this I think we would have to give up our rate and go on the current rate!

If it was me, I would not permanently reduce my term. Pay your lumpsum and your monthly payment will reduce. Using online banking, pay an extra payment to your mortgage account every month to bring it up to your old payment, or more if you can afford it.

The term will be shortened anyway by the over payments but you can skip a month or stop overpaying whenever you want. If you're getting free banking for having a mortgage, maybe keep a small balance.

As above, overpaying may not be in your best interests though.

 

[mimes]

I spoke with AIB last week and they confirm my ERC is zero when reducing my scheduled monthly repayment with a lump sum payment.

If I decide to reduce my term however, they advise that I will break out of my current mortgage term (& rate) and will move onto a new higher interest rate. (as the term has been reduced)

I can't see this in my contract but my agreed term is 11 years on the current rate.. If overpayment occurred this would now be ~10.5 years. They are stating this change in the agreement warrants a change in interest rate.

 

[Cathbarr]

I spoke with AIB last week and they confirm my ERC is zero when reducing my scheduled monthly repayment with a lump sum payment.

If I decide to reduce my term however, they advise that I will break out of my current mortgage term (& rate) and will move onto a new higher interest rate. (as the term has been reduced)

I can't see this in my contract but my agreed term is 11 years on the current rate.. If overpayment occurred this would now be ~10.5 years. They are stating this change in the agreement warrants a change in interest rate.

I also got a letter from AIB last week confirming if we wanted to overpay and reduce the term we would have to give up our fixed rate of 2.35% and move to a new rate. We have 4 years left on our current rate and the new rate would be 4.15%.

We have decided to leave everything as within 2 to 3 years we will be able to clear off the mortgage fully with the lump sum.

Thanks to everyone for the tips regarding paying/not paying the mortgage.

 

[The Oggster]

I also got a letter from AIB last week confirming if we wanted to overpay and reduce the term we would have to give up our fixed rate of 2.35% and move to a new rate. We have 4 years left on our current rate and the new rate would be 4.15%.

We have decided to leave everything as within 2 to 3 years we will be able to clear off the mortgage fully with the lump sum.

Thanks to everyone for the tips regarding paying/not paying the mortgage.

You can overpay now and leave the term as it is. I've paid extra off my fixed mortgage and the monthly payment reduces. You can do this every month or a lumpsum and the same thing happens. There's no need to reduce the term.

 

[mimes]

You can overpay now and leave the term as it is. I've paid extra off my fixed mortgage and the monthly payment reduces. You can do this every month or a lumpsum and the same thing happens. There's no need to reduce the term.

What happens if you pay off your full 5 year term? you break contract and move to a higher rate?

If so, at an interest rate of 2.1%, i'm not sure if its the best saving.

 

[The Oggster]

What happens if you pay off your full 5 year term? you break contract and move to a higher rate?

If so, at an interest rate of 2.1%, i'm not sure if its the best saving.

I don't know what you mean by 'pay off your full 5 year term'. There is no set amount to be paid off in your 5 year fixed rate. That just locks in the interest rate for 5 years. The fixed term length does not reduce.

You can pay extra every month and your calculated payment will reduce as the extra comes off the capital.

 

[mimes]

I don't know what you mean by 'pay off your full 5 year term'. There is no set amount to be paid off in your 5 year fixed rate. That just locks in the interest rate for 5 years. The fixed term length does not reduce.

You can pay extra every month and your calculated payment will reduce as the extra comes off the capital.

If my agreed term is 5 years fixed and in that time my estimated total payback to the bank at the standard monthly rate will be say 100k.

Now say, I pay the total sum of 100k off in 2 years, do I now move to a new interest rate? (as the outstanding balance is now outside the agreed 5 year term?)

 

[Cathbarr]

You can overpay now and leave the term as it is. I've paid extra off my fixed mortgage and the monthly payment reduces. You can do this every month or a lumpsum and the same thing happens. There's no need to reduce

So just make the lumpsum repayment now and then over pay every monthm

 

[The Oggster]

If my agreed term is 5 years fixed and in that time my estimated total payback to the bank at the standard monthly rate will be say 100k.

Now say, I pay the total sum of 100k off in 2 years, do I now move to a new interest rate? (as the outstanding balance is now outside the agreed 5 year term?)

There is no fixed amount to be paid. The fixed period is just for your interest rate during that time.

If you owe €200,000 and have worked out that your payback during the 5 year term is going to be €100,000 but you pay that in 2 years, then your balance is now €100,000 with another 3 years at the fixed rate. This will result in your monthly payment reducing. You could keep paying the higher rate if you wish and your mortgage will be cleared earlier.

 

[The Oggster]

So just make the lumpsum repayment now and then over pay every monthm

You could do that.

I'm basing everything I've said on the AIB quirk where you may not have to pay a fee. Anyone who fixed at the lower rates before the increases should be ok but you can ask AIB at first if you're not sure.

 

[mimes]

There is no fixed amount to be paid. The fixed period is just for your interest rate during that time.

If you owe €200,000 and have worked out that your payback during the 5 year term is going to be €100,000 but you pay that in 2 years, then your balance is now €100,000 with another 3 years at the fixed rate. This will result in your monthly payment reducing. You could keep paying the higher rate if you wish and your mortgage will be cleared earlier.

This is what I thought however the bank seems to think its not the case. I have a query open and will advise on this.

 

[The Oggster]

This is what I thought however the bank seems to think its not the case. I have a query open and will advise on this.

Don't ask them to reduce your term. I've overpaid a few times and the monthly amount due has gone down. If you keep that up over the life of your mortgage, it will be paid off early anyway. But it gives you more flexibility as you can stop overpaying.

If you change the length of your mortgage, you will break out of your current fixed and will have to refix or stay on variable.

I'd be interested to hear if they say anything different.

 

[orwell]

I have the green mortgage drawn down last November.l, 5 year fixed at 2/1%, I over pay through the AIB banking app every month and get a letter every month acknowledging my over payment, telling me there’s no charges for the overpayment and my new monthly payment going forward is x amount
So don’t reduce the term but your amount payable monthly goes down and that will reduce the term of your mortgage over all

But thats based on the quirk in their early repayment calculation in my mortgage agreement .. which is talked about in the start of this thread

 

[Cathbarr]

You could do that.

I'm basing everything I've said on the AIB quirk where you may not have to pay a fee. Anyone who fixed at the lower rates before the increases should be ok but you can ask AIB at first if you're not sure.

No I have a letter stating our breakage fee is 0 so we could do that. Thanks for your help.

 

[FCBC12]

I have the green mortgage drawn down last November.l, 5 year fixed at 2/1%, I over pay through the AIB banking app every month and get a letter every month acknowledging my over payment, telling me there’s no charges for the overpayment and my new monthly payment going forward is x amount
So don’t reduce the term but your amount payable monthly goes down and that will reduce the term of your mortgage over all

But thats based on the quirk in their early repayment calculation in my mortgage agreement .. which is talked about in the start of this thread

Hi orwell,

1) How do you make this payment, is it done through AIB Internet Banking, and do you need a card reader?

2) Is there a separate portal that you can login to see the outstanding mortgage balance?

 

[orwell]

I have AIB current account (free banking cause of mortgage.. my main bank is TSB)
I have a direct debit from main bank TSB weekly to AIB current account and the mortgage comes out of AIB and then what’s left over monthly I do the quick pay from current to mortgage
I can’t remember did I need to use the card reader to set up the mortgage account as the payee from the current but if I did it was very easy
I can see my whole mortgage account on the app, payment received and the balance outstanding.. it’s actually great (but frightening!)
My mortgage reduced by €300 when I switched to AIB last November and o overpay that amount manually through the app each month

 

[FCBC12]

I have AIB current account (free banking cause of mortgage.. my main bank is TSB)
I have a direct debit from main bank TSB weekly to AIB current account and the mortgage comes out of AIB and then what’s left over monthly I do the quick pay from current to mortgage
I can’t remember did I need to use the card reader to set up the mortgage account as the payee from the current but if I did it was very easy
I can see my whole mortgage account on the app, payment received and the balance outstanding.. it’s actually great (but frightening!)
My mortgage reduced by €300 when I switched to AIB last November and o overpay that amount manually through the app each month

That's great, thank you. I had to manually add our mortgage account to the AIB Internet Banking. Now it shows both current and mortgage accounts, and almost sure it will allow us transfer(overpay) from current to mortgage without needing the card reader.

 

[BongoBangoBingo]

That's great, thank you. I had to manually add our mortgage account to the AIB Internet Banking. Now it shows both current and mortgage accounts, and almost sure it will allow us transfer(overpay) from current to mortgage without needing the card reader.

AIB is my main bank, I have my current account and mortgage account in AIB online banking

I can transfer money from current to mortgage account instantly without needing the card reader, the mortgage balance is instantly reduced and I receive the letter in the post confirming the overpayment, reduced monthly repayment, no charge etc about 7-10 days later

 

[The Oggster]

Just looking for confirmation here.

We looking to fix our top up portion of our mortgage. Currently on variable of 3.1%. We qualify for he 5 year green rate of 3.65%.

We would like to continue overpaying. Am I right in thinking that if the rate stays the same there is no fee due? Using the formula seems to confirm this for me?

Also, do they only look at other fixed rates to work out if there's a fee due? The variable is currently lower than what we would be fixing at. Is that taken into account?

 

[RedOnion]

Am I right in thinking that if the rate stays the same there is no fee due? Using the formula seems to confirm this for me?

Yes, correct.

Also, do they only look at other fixed rates to work out if there's a fee due? The variable is currently lower than what we would be fixing at. Is that taken into account?

The 2nd calculation looks at market (inter bank) rates, but AIBs own variable rates don't factor.