Paying off portion of fixed mortgage - Penalty fees with different banks

machalla

Registered User
Messages
100
I'm currently looking at switching away from EBS at a 3% fixed rate which has come to an end now. This would be for a >80% <90% LTV mortgage.

I'm looking to get a fixed rate for a period of 4-5 years. The two best rates I can get are Ulster Bank and KBC.

Later in the year I may have a lump sum that will allow me to pay off about a third of the new mortgage.

I can't seem to find much info so far on which banks will allow you to pay off a lump sum on a fixed rate mortgage without penalty.

If anyone has any particular experience with any of the banks on this I'd appreciate hearing about it. EBS have said they don't have any rules around that at the moment but it may change in the future.
 

Dauhee

Registered User
Messages
137
UB allow 10% of loan amount
BOI allow extr 10% of monthly payment
PTSB may allow unlimited extra if you ask nicely!

In saying that, in current market break fees are near 0 anyhow

If rates were going to go up, you could ask for variable portion on mortgage and use lump sum for that

The main thing is, make sure you switch from EBS :)
 

lledlledlled

Registered User
Messages
381
If you are likely to be able to pay off one third with a lump sum, it sounds like you should have a split mortgage, one third variable, two thirds fixed.
I have something similar to this with kbc at the moment.
 

machalla

Registered User
Messages
100
Thank you all again for the useful and helpful suggestions here, much appreicated. The split mortgage idea sounds like it might have potential for me in this case. The timing around any potential lump sum will be uncertain.
 

Zenith63

Registered User
Messages
832
What do the AAM brain trust think about shortening the term vs. decreasing the monthly repayments when over-paying? Are both options always available, are there merits to one over the other?

I'm hoping to pay-off some of mine later in the year (likely a lump sum to get down below 60% LTV) and would prefer to see the monthly repayments come down, rather than shortening the term. My logic being that shortening the term means that if some day money is tight, you're still "stuck" on the higher repayments and might regret having paid back part of the mortgage and not having that cash there, whereas getting the monthly repayments down makes it easier to manage the monthly repayment if you did get into money trouble some day.
 

Andrew365

Registered User
Messages
270
What do the AAM brain trust think about shortening the term vs. decreasing the monthly repayments when over-paying? Are both options always available, are there merits to one over the other?

I'm hoping to pay-off some of mine later in the year (likely a lump sum to get down below 60% LTV) and would prefer to see the monthly repayments come down, rather than shortening the term. My logic being that shortening the term means that if some day money is tight, you're still "stuck" on the higher repayments and might regret having paid back part of the mortgage and not having that cash there, whereas getting the monthly repayments down makes it easier to manage the monthly repayment if you did get into money trouble some day.

By overpaying you are reducing the mortgage term without contractually reducing it, therefore you retain flexibility to stop overpaying should you need to for a period of time.
 

Paul F

Registered User
Messages
84
BoI allow you overpay 10% on your monthly repayment on fixed rate. Don't allow large capital repayments. So you'd need to trickle it in monthly.

Thanks EmmDee. I know that I would be penalised if I overpaid by more than 10%. But can anybody here tell me if BOI forbid this outright?
 

Boyd

Registered User
Messages
1,614
Why don't you ring BOI and ask them? It seems a very specific question that wouldn't come up that often....
 

Paul F

Registered User
Messages
84
So basically, it's 300 eur to pay off a lump sum on your current fixed rate mortgage or 1514 eur if you choose to do a different type of loan as well. They told me that those fees change everyday so it will be slightly different if you call them later on.

Thanks Monfreid - very helpful.

If you're OK with sharing some information I could check if the fees they are quoting seem correct:
  • When did you originally fix (month and year)?
  • For how long?
  • What's your mortgage balance?
  • How big was the lump sum that you wanted to pay off?
Cheers
 

iceblue

Registered User
Messages
15
If it helps:
We are on a 2yr fixed rate with BOI. Finishing next year.
We over pay with BOI each month by 10%. This is about €130pm so greater then the €65 noted above.
We have also paid off a lump sum each year on top of this monthly payment for which a very small breakage charge was incurred each time.
So if large is about 25k, then large overpayments are not forbidden
 
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Monfreid

Registered User
Messages
27
@Paul F

How did you make your calculations?

How about a 10 years fixed rate mortgage @ 3.3% (Balance 117K) with 5 years to go in the fixed term, what if you want to pay lump sum of 25K ?

Just curious because my plan is to get a Split rate mortgage (10 years fixed + SVR)
Pay off 50K, then split the rate and put 30K on the SVR loan, pay this off as quick as possible and I will end up with just the 10 years fixed rate to pay at 750 eur per month instead of 1200 eur currently. The continue saving and, either make an overpayment during the fixed rate term or wait and payoff the mortgage in 10 years
 

Paul F

Registered User
Messages
84
@Paul F

How did you make your calculations?

How about a 10 years fixed rate mortgage @ 3.3% (Balance 117K) with 5 years to go in the fixed term, what if you want to pay lump sum of 25K ?

Just curious because my plan is to get a Split rate mortgage (10 years fixed + SVR)
Pay off 50K, then split the rate and put 30K on the SVR loan, pay this off as quick as possible and I will end up with just the 10 years fixed rate to pay at 750 eur per month instead of 1200 eur currently. The continue saving and, either make an overpayment during the fixed rate term or wait and payoff the mortgage in 10 years

The formula for the break fee (or the overpayment fee) is
A*(R-R1)*Y
where
  • Y is the number of years until the end of the fixed rate (approximately 1.9)
  • A is the outstanding mortgage balance (or the amount you want to overpay)
  • R is the 5-year interbank rate available to the lender in July 2016 (approximately -0.14%)
  • R1 is the 2-year interbank rate available to the lender a few days ago (approximately -0.52%). We use the 2-year rate because it's the one closest to Y.
Like other people here I use this site to estimate the interbank rates.

So your break fee is 222000 * (-0.14/100 - (-0.52/100)) * 1.9 = €1,600 (approximately).

It is impossible to know what your break fee will be in 5 years because it depends on the interbank rate on the day that you break. But if it is higher than the interbank rate when you fix, the break fee will be zero.

(Don't rely on any break fees I quote – they are only estimates.)
 

Monfreid

Registered User
Messages
27
Thanks @Paul F

I was only asking for the break fee in 5 years just as an example, being half way through a 10 years fixed rate because I wasn't sure how much of an impact the remaining years left on the fixed rate would have on a breaking fee
How do you calculate the overpayment fee if you stay with your current fixed rate? it seems to be much lower than the breaking fee so it's a good option too I think.
 
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Paul F

Registered User
Messages
84
Thanks @Paul F

I was only asking for the break fee in 5 years just as an example, being half way through a 10 years fixed rate because I wasn't sure how much of an impact the remaining years left on the fixed rate would have on a breaking fee
How do you calculate the overpayment fee if you stay with your current fixed rate? it seems to be much lower than the breaking fee so it's a good option too I think.

As you get closer to the end of the fixed period, the break fee goes down (everything else being equal). See 'Y' in the formula.

To calculate the overpayment fee you just use A = overpayment amount (instead of A = remaining balance) in the formula.
 
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