Reduced Mortgage Amount v Reduced Term

J

Jane

Registered User
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132
Hi all,

Just looking for some advice. I have a tracker mortgage with PTSB (I know, they hate me!) and I have been overpaying my mortgage for quite a while. I've built up €36k credit.

They have advised me that if I offset the credit against the remaining loan I can A) reduce my monthly payments (reducing by about 40%) or reduce my term (reducing by about 6 years)

I'm not really sure what the best option is.

Appreciate any advice.
Jane

Edit. Sorry I meant to say that I was leaning more towards reducing the amount (option A). Then I'd continue with my normal over payment and then the difference I'd have between the original payment versus the new reduced payment will leave me with more money that I would put into savings instead. Otherwise (if I choose the term reduction option) then I'd be paying the same amount as always and I'm not sure that's as beneficial as ploughing more money into my savings.
 
I would reduce the amount. That way you can continue overpaying if you wish, but you have more flexibility later if you need it
 
Thanks Berni, yeah I think so too.


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My thinking is it's cheap money, that it's actually a good way of saving as most of the payment is capital and that you might try and make something of the 'extra' you have. But you'd have to post up all your facts and figures to get a better idea. For example if you're in negative equity my advice might be different.
 
Bronte said:
My thinking is it's cheap money, that it's actually a good way of saving as most of the payment is capital and that you might try and make something of the 'extra' you have. But you'd have to post up all your facts and figures to get a better idea. For example if you're in negative equity my advice might be different.
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I see what you mean. I'm not in negative equity. I have been mulling that over too. My "reduced" mortgage will be around €300 a month for the remainder of the original term. Or I can keep paying the original amount and reduce the term (with the lump sum credit I built up)

Either way I think I'd be better paying any over payments I had planned into savings instead.
 
Why do either. Can you not continue to overpay and the real effect is the term is being reduced but leave the mortgage contract as it stands. If the worst happens and you are in difficulties then you still have the full original term to respread the mortgage over and reduce payments then but if don't have problems you have it paid early. If you change the terms now and reduce the period now you will be in arrears and have broken the contract if you miss one payment or cannot make the full payment one month.
 
Thrifty said:
Why do either. Can you not continue to overpay and the real effect is the term is being reduced but leave the mortgage contract as it stands. If the worst happens and you are in difficulties then you still have the full original term to respread the mortgage over and reduce payments then but if don't have problems you have it paid early. If you change the terms now and reduce the period now you will be in arrears and have broken the contract if you miss one payment or cannot make the full payment one month.
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I suppose my main issue was having the €36K sitting there doing nothing. This is why I want to offset it.

Then I'm trying to decide my next step. I just don't like the idea that PTSB put your over-payment in as a building credit, rather then off the principal. I might as well be saving that money and getting a better rate!
 
Why not put it in a deposit account earning more interest then you are paying ptsb for it? assuming your mortgage rate is low...

Edit -- just looked here -http://www.askaboutmoney.com/showthread.php?t=90481 - i hadnt realised rates had fallen so much --

after DIRT it probably isnt worth your while!
 
WindUp said:
Why not put it in a deposit account earning more interest then you are paying ptsb for it? assuming your mortgage rate is low...

Edit -- just looked here -http://www.askaboutmoney.com/showthread.php?t=90481 - i hadnt realised rates had fallen so much --

after DIRT it probably isnt worth your while!
Click to expand...

It's not great alright. I'll need to look at the figures in finite detail. I think I'd still be marginally better off with the savings route, even after DIRT.
 
dont forget to factor in the cost of mortgage protection insurance on the higher loan amount....
 
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