Pay now or hold off?

F

Fozzie

Registered User
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Hi Again.

I am on 2.6% fixed rate with UB with 290k outstanding on my mortgage with 1 year left on my fixed rate. Paying 3K per month. I am in a fortunate position where I can pay off the annual 10% over payment which is 30 K in this case.

I am trying to decide should I pay this now or hold off on this because if I do, it will place me below the €250K threshold for the reduced rate this time next year when my fixed rate expires. What do people think? Will reduced fixed rates (2.3%) be available next year?

Any input from my learned friends would be greatly appreciated.

Thanks in advance

Fozzie
 
You could look at it this way:
If you were to not overpay it, what would you do with that money instead? Where would you put it that would give you a risk-free after tax return of 2.6%? Unless you need the money in the short-medium term, I would imagine it is a good idea to overpay.
You divert some of the money to maxing out your pension contributions.
 
Thanks for the reply. Sense in that. I just looked at KBC and in between all the photos of people with nice moustache’s it seems they have low rates too which do not on first glance have a 250k threshold. So if that animal is still at the watering hole next year it could be an option.

Thoughts anyone else?
 
Have a look at these tables, most of the rates are still accurate or slightly lower

Or plug your numbers into the CCPC calculator to get an idea of what else is available to you if you switch

Compare mortgages - ccpc.ie consumers

Whether you are a first-time buyer, or you're looking to switch or move home, use our mortgage comparisons to find the best mortgage for you.
www.ccpc.ie www.ccpc.ie

You can also request a break fee from UB now and see how much it is. If it is small, then it may make sense to overpay now and bring the balance down to €260k. Then break and fix at the new 5 year high value rate
 
Ok cool. I’ll try those and see what happens. Last time I checked break fee it was about 2.5K.
 
No one can guess where the rates will be in a year's time.

If you do not need the money for something else, you will save (future interest) by placing it against your mortgage.
 
Personally I would pay it off now, and save 1 years interest in the overpayment amount Vs waiting to possibly save 0.15% interest on the entire? You'll have a lower balance, and paying off 3k per month (plus any further overpayments) will reduce the benefit of that 0.15% quickly.

This is assuming there's no opportunity cost by not doing something else with the money.

If you are looking for a break fee, remember it will be 10% lower if you pay off the 10% first before breaking.
Without knowing details of when you fixed, your break fee will be a max of 3,120 after you pay off a lump sum. It might be less based on market rates approach.

You need to weigh up break cost now vs future interest saving from locking in at a lower rate, including looking at moving to another lender - switching to KBC for example the break fee would be covered by cashback, and the interest savings for the first year should cover the legal fees.
 
Thanks Red Onion. I think I’m going to play the ball in front of me rather than the possible match next year and pay the 10% and see the state of play this time next year when I can avoid break fee. This has been v helpful in my decision making process.
 
@Fozzie
Might be no harm getting a break fee calculation from them. Without knowing the exact dates, it's difficult to estimate, but it should be under 2k at the moment based on market rates. All other things being equal it will reduce as you get closer to the end of fixed rate, so it's worth keeping an eye on it every few months.
 
Hey Redonion. I was strictly pass maths. By paying off 30K now how much do save on a 12 year mortgage @ say 2.6% for pig iron?
 
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