Pepper Split Mortgage - €250k capital to reduce it?

[Westirl]

My mortgage was recently sold to Pepper (November) from PTSB. Involved in the whole interest rate saga many years ago and split mortgage was agreed. 190k is parked. 350k is remaining at 2.25% tracker.

Couldn’t change our situation sooner as child had serious medical issue so only one parent could work, thankfully things improved both working for some years now mid 40’s, ok pension (mainly from pre child illness and decent salaries) but will be able to prioritise again over the next few years. The reason PTSB told us they sold to pepper was because we couldn’t provide information on how we plan to pay back the parked 200k

Lucky for us we have received 250,000 euro, this is solely marked to pay off our mortgage. The PTSB issue went on for so long and I was so busy with other life issues that it is all abit vague now even though at the time had a major impact on our lives. The past is the past and life is good now.

My question is how do I approach Pepper I know there are no deals to be had but do I pay off the 190k parked and the balance 60k off the main mortgage bringing my mortgage balance down to 290k, is it as simple as that?

I believed at the time PTSB stole from us, but I really think now health and family Are the most important thing and we have been very lucky over the last few years with Health and our recent amazing windfall. I definitely want this money off the mortgage it will make a massive difference to our lives to have a small affordable mortgage and give us lots of options and the ability to do nice things, as we have been frugal for a long long time.

I would really appreciate advice on if my approach to Pepper is the right way to go about it or if I am missing something or should involve an outside party.
Thanks in advance

 

[Westirl]

Apologies can’t seem to edit thread but just to add we have 22 years left on the mortgage and no other debt.

 

[Brendan Burgess]

190k is parked. 350k is remaining at 2.25% tracker.

Your total mortgage is €540k
You are paying interest of €8,000 but this will rise.
So your actual interest rate is 1.8%

So whether ptsb "stole" from you or not, they have given you a pretty good deal.

 

[Brendan Burgess]

do I pay off the 190k parked and the balance 60k off the main mortgage bringing my mortgage balance down to 290k, is it as simple as that?

That is what Pepper should do. And terminating your split mortgage is a good idea because it means that your impaired credit record will begin the process of healing. After 5 years, the restructure will go off your credit record and so if you want to switch or borrow from another lender, it will be easier.

However, it's possible that Pepper might ask you or allow you to pay the €250k off the active part of the mortgage.

By paying €190k off the active part instead of off the parked part, you will be saving yourself about €6,000 a year in interest. €190k @3.5% (when interest rates rise.)

It seems from some other posters on Askaboutmoney that the banks and Pepper are sometimes happy to let you overpay the active part.

Why Would KBC want to keep me on a split mortgage

That's brilliant thank you.

www.askaboutmoney.com

Key Post - What has your split mortgage experience been like?

I would like to collect some information or case studies on people with split mortgages. Could you provide the following information. Rough figures will do fine. Original split 1) Which lender 2) Date of split 3) Amount of split e.g. €200k active /€100k warehouse 4) Were you on a tracker or...

www.askaboutmoney.com

I don't know if that would apply to a big lump sum like €250k.

But if you are not planning to trade up or borrow again, then I think you should try to set all the money against the active part. You can keep up the same repayments and you will then clear the full active mortgage a lot earlier.

Brendan

 

[Westirl]

Thank you, I am not planning on trading up or moving the house is kitted out for my son and Is a great house. Pepper contacted me in May they wanted to review my mortgage but I told them my circumstances have changed and would they give me a bit of time which they did. (I wanted to get the actual final figure into my bank account because I still can’t really believe it)

In fairness I do realise now that I got a good deal and for quite a long time also, when our mortgage kept on increasing we were the lucky ones that could afford to pay it and had or jobs. We really don’t expect life to throw curveballs at us. I am back at work in an easier job 4 days a week and half my original salary but love it and don’t know how I originally ever did a stressful high paying job, I used to waste so much money on clothes and expensive holidays and for what really. I have learned a lot !!

I’ll ring them mid week and try to get them to take it off the active amount first and if they don’t that’s ok too, I just want to be sure I’m doing the right thing as it an awful lot of money and don’t want to give it away too lightly. I wouldn’t have thought of that and yes I want to reduce the term and continue paying the amount we are paying maybe a little less. I am on mortgage calculators and could have my mortgage paid off in less than 10 years who would have thought!!

 

[Westirl]

Hi I am hoping you can help me again, I am having great difficulty in speaking to someone in Pepper after I made the lump sum payment. However Pepper sent me a letter saying my mortgage is
Warehouse - 198k
Active- 98k

The interest rate is gone up to 3.5% from the first of October so my repayment has increased a lot to €1901.77

I rang last week to say the repayment/interest shouldn’t be that high on 98k and the girl said there must be an error and she will send a letter to me with the revised payment. I never received a letter and rang again today and another girl told me I am paying interest on the parked amount also and that’s that basically, interest has to be charged on the parked amount also even though it wasn’t before.

The statements they send out are very poor and they give limited information such as the term ( I think I have 22 yrs left ) from my last letter in nov from PTSB.

What I want to know is it correct that they are now charging interest on the parked amount? Or is this changing the term.
Thanks in advance

 

[Brendan Burgess]

Original:

190k is parked. 350k is remaining at 2.25% tracker.

Now, after paying off capital:

Warehouse - 198k
Active- 98k

It's impossible to tell what they are doing without seeing a statement.

The terms of the ptsb warehouse were clear and I assume your split agreement reflects that. No interest on the warehouse.

It is very likely that Pepper will add the warehouse to the active amount so you will be paying interest on it and repaying capital as well.

The question is "Can you afford it?" If you can, stick with it and start the process of fixing your credit record.

If you can't tell Pepper that.

 

[Brendan Burgess]

I think that the only thing you can do is send a letter to Pepper and ask them to explain how the repayment is calculated.
Ask them for a comprehensive statement as well.

If you end up going to the Ombudsman, letters are much better than phone calls.



Brendan

 

[Brendan Burgess]

It's a fairly odd situation. If you had not paid the €250k off your mortgage and held onto it, you could well afford full repayments.

Brendan

 

[Westirl]

Hi Brendan I am attaching a statement from a few months back after I paid the lump sum, thanks in advance for your advice

 

[Brendan Burgess]

That tells us only the following
The interest was charged at 2.25% on the active mortgage of €356,156

356,156 @ 2.25% = €8,013 per year = €667 per month

So they were calculating it correctly.

 

[Brendan Burgess]

As they appear to have set the capital payment against the active amount, the interest charge should fall to €187 per month.

But will then rise to €291 as the ECB rate rose.

 

[Brendan Burgess]

The interest rate is gone up to 3.5% from the first of October so my repayment has increased a lot to €1901.77

356,000 @ 2.25% for 22 years is €1,710 your old repayment or near enough.

€300,000 @3.5% for 22 years is only €1,631

So I have no idea where the higher repayment is coming from.

Brendan

 

[ClubMan]

@Brendan Burgess, where are you getting 18 years from? @Westirl said that they probably have 22 years years left.

€300k @ 3.5% for 22 years = €1,866 €1,622

Maybe life insurance is bundled to give the ~€1,900 figure mentioned by @Westirl.

Edit: corrected calculation mistake.

 

[Brendan Burgess]

Thanks Clubman

I have corrected my figures. I think your figure is wrong? Can you double check it.

Brendan

 

[Westirl]

Thank you, there is no life insurance I pay that separately every month. This is the only statement I have received from Pepper and is from August. I will ring them on Monday and ask for a comprehensive statement. I am confused, I probably should have kept all that money for a little while longer, thank you again.

 

[ClubMan]

Thanks Clubman

I have corrected my figures. I think your figure is wrong? Can you double check it.

Brendan

I used the CCPC calculator.

Getting a mortgage calculator - CCPC

The mortgage calculator shows you what your monthly repayments would be for a mortgage, depending on the amount you borrow, how long you want the mortgage to last and the rate you pay

www.ccpc.ie

I must've made a mistake earlier.
I think that I also used 18 instead of 22 years!

It gives €300k @ 3.5% for 22 years = €1,622.

 

[Westirl]

Hi
I am wondering if you can help me with this statement, I eventually got one from Pepper I don’t understand the “Interest charged” and “Interest Rebate” part. My current interest rate is 3.5% tracker so due for another increase.
Many thanks in advance

 

[Brendan Burgess]

@Westirl

This is what seems to be happening:

Taking the October charge

1) They are charging you interest on the full amount
€300k @ ECB (1.25% ) + 2.25% = 4.45% 1,335 per year or €1,100 per month.
or maybe €300k @ ECB (.5%) + 2.25% = 2.75% = €8,250 per year or €687 per month

So the interest rate increased during the period, to the charge of €922 reflects ECB .5% for one part and 1.25% for the rest. ( €922x 12= 11,064 = 3.7% average.)

You are still on a split mortgage
Then giving you a rebate on the warehouse.
190k @3.7% = €7,030 per year or €585 per month.

 

[Brendan Burgess]

But...

In October, you paid net interest of €262 ( €922 - €660) on a mortgage of €297k

This is an effective interest rate of 1.05%.

Under the circumstances, I would not press them for an explanation. I would just live happily in ignorance.

Brendan