Paying 30k off mortgage

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mobileme

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My partner and I will have 30k coming to us soon and would like to pay this off our mortgage.

Our mortgage is 375k over 35 years with 33.5 years remaining. Interest rate is 4.7% and monthly repayment is €1535. House value is approx €460k. The mortgage is with BOSI and they are giving me two options for paying 30k off the principal - we can keep the term at 35 years and reduce the monthly repayment OR pay €95 to change the term and keep our monthly repayment the same. I don't want to reduce the monthly repayment but don't think that I should have to pay to reduce the term either.

We are comfortable with the monthly repayment and could afford to pay up to €300pm extra without a problem. Is there a better mortgage option out there for us? We have three years remaining on FTB mortgage interest relief.
 
I don't understand why they are charging to alter the term. I did this with EBS years ago and then kept my repayment at its "normal" level after the capital repayment and they just told me what the reduced effective term was but didn't actually reschedule the loan per se. The charged nothing for this. Not sure if/why other lenders don't do the same. If they insist then maybe haggle with them and threaten to walk - or do anyway if there's a better deal out there. While €95 is not a huge amount in the greater scheme of things with mortgages I see no reason why you should pay it.
 
Thanks. I have found them to be quite inflexible on the phone i.e. this is the policy and you can like it or lump it.

Would I save more in interest by using the 30k to reduce the monthly repayment and keeping term the same, or reducing the term?
 
You will almost certainly save more by making a lump sum capital repayment and then keeping the repayment at their normal scheduled level and reducing the effective or actual term. See Karl Jeacle's mortgage calculator to estimate the savings achievable using different accelerated repayment strategies. If they insist on charging the fee to alter the term (as I said I'm not sure why they want/need to explicitly alter the term in any case) then haggle with them and threaten to move elsewhere (and do so if you can make further savings with another lender).
 
Pay your lump sum off and don't reschedule the term, but just tell them (in writing) that you want to keep your repayments the same (or an even greater monthly overpayment if you want), and that the monthly overpayments are to be deducted from the capital.

That way, your term will effectively be shortened if you keep making the overpayments, but if a situation arises in the future where you need a bit of cash unexpectedly, you can revert to the ordinary (lower) repayments without any hassle - no need to reschedule back to a longer timeframe.

And if they tell you they can't do that, or that you need to pay a fee, then look elsewhere. A €95 fee is just plain greedy!
 
I had this problem with BOSI 4 years ago - Except in my case i had more than 1 lump sum I wanted to pay off the mortgage. I went to the Financial regualtor - he informed me that charging €95 was illegal. He fined BoSI €500. I moved my mortgage to NIB - whom I have found to be excellent. PM me for more details.
 
With regard to damson's comment above - when I asked BoSI to do this 4 years ago they told me they would be charging me €95 a month for the priviledge... This was the main reason I took my debt elsewhere.

On a more disappointing note I asked the Financial Ombudsman who adjudicated on my case what would happen to other people whom this charge was levied on and would the bank stop doing in it the future - he wouldn't answer these questions. A bit of a paper tiger.
 
Interesting reading above...! I also had a similar experience with BOSI recently, and although I remember well their 'take it or leave it' attitude on the phone (followed by "Now Sir, is there anything else I can help you with?") I don't recall any mention of a €95 fee. They just said I was not allowed to pay off a lump sum, and keep the monthly repayments the same. Maybe they have now noted that the fee is illegal, but not the prohibition on doing so!
 
ciarand said:
I had this problem with BOSI 4 years ago - Except in my case i had more than 1 lump sum I wanted to pay off the mortgage.
Click to expand...
I did this (several lump sum capital repayments and also increased ongoing repayments) with EBS a few years back and there was no problem and no additional charges. They didn't explicitly alter the term of the mortgage. The effective term was reduced though - from 20 to about 6-7 years.
I went to the Financial regualtor - he informed me that charging €95 was illegal. He fined BoSI €500. I moved my mortgage to NIB - whom I have found to be excellent. PM me for more details.
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Bear on mind that today the [broken link removed] will only deal with complaints once you have exhausted the specific financial institution's own complaints process, you are not satisfied with the results and you get a "ginal response" letter from them to take to the FSO.
 
I've done what I suggested above with a BoI mortgage (made lump sum repayment and kept repayments the same, so regular monthly overpayment coming off capital) and they had no problem whatever with it. I'm staggered that BOSI think it's ok to levy a €95 charge for the privilege.
 
As far as I know Bank of Scotland Ireland are the only bank in the Irish market who discourage! you from making unscheduled payments on a variable or tracker mortgage. The financial ombudsman thought this was against the law 4 years ago but doesn't seem to have done much about it...
 
I can confirm BofSI do levy a €95 fee to make a lump sum payment to drop the number of years left (as said above they will reduce the monthly payments free of charge). I had just made a payment when i saw this tread so I called them and said that I had some information that the fee may be illegal. She spoke to a supervisor and came back to say that as far as they were concerned there was a fee to do this type of payment and they were not in a position to make comments on previous cases (she was rather defensive considering i just asked a question). So I forwarded the details to the FSO & we'll see what they come back with. If it is legal so be it, but I did find it annoying to pay money to pay money....if you know what I mean!

I did notice when I was going back thru my records for a previous payment we made, that they did not issue a receipt for the fee....they acknowledged the "lump sum" & the reduced term, but no mention of the fee. I thought they had to issue a receipt for all monies recieved?
 
Would you consider a current account mortgage? If you put your 30K into a current account and also the €300 a month you say that you can save, you could significantly reduce your repayment term. Another advantage is that you would always have access to the 30k in case of emergency. First Active have a calculator on their website where you can check potential savings.
 
Aren't the rates on current account mortgages on offer higher than other tracker/variable rates so to just get onto a level playing pitch versus these you have no choice but to put money in the offset account in order to reduce the effective rate charged. Only after you have done this do you stand to save compared to the most competitive rate on offer?
 
ClubMan said:
Aren't the rates on current account mortgages on offer higher than other tracker/variable rates so to just get onto a level playing pitch versus these you have no choice but to put money in the offset account in order to reduce the effective rate charged. Only after you have done this do you stand to save compared to the most competitive rate on offer?
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True, but First Actives offset mortgage is currently 5.3% which, while not the lowest APR out there is not a bad rate. If you don't have a lump sum, or a regular saving, then there are definitely better rates out there.
 
Just an update on an old tread -
I send the details to the FSO regarding the fee charged by Bank of Scotland & recieved a reply from them.
They have confirmed that Bank of Scotland is entitled to charge the €95 if you make a lump sum payment & opt to have the duration of the term reduced (rather than reducing the amount of the monthly payments, for which there is no charge).
While I understand that they have the right to make this charge, it does mean that we are less likely to make lump-sum payments unless we have a significant amount to pay off => we don't get to pay off the mortgage as quickly as we would if they did not make this charge. Our last bank allowed these payment (no fee) and anytime we got a work bonus or saved a couple of grand, we paid it towards the mortgage & had the mortgage cleared in a signifcantly shorter time-scale.
 
Mobileme,
If you are knocking a substansial sum of your mortgage (€30,000) you should seriously consider looking at aib or nib who both seem to have good LTV rates at the moment. Certainly your existing bank dont appear to care whether you stay or go so why not go and get a better rate from a more customer friendly bank. You might end up with a lower term and lower repayments!
 
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