Can't reduce term, what now?

northern_at_heart

We have a 25-year repayment mortgage with Bank of Ireland, on a 2-year fixed rate (3.94%) til November 2012. Mortgage amount is approx £195K, monthly repayments £1028.

In addition we've been making small (£100/month) lump sum overpayments via SO, hoping that this will reduce the term. However I've now realised (from reading this) that we can't reduce the term while we're still in the 'promotional period' of the 2-yr fix.

So presumably at some point our monthly payments will reduce instead, to reflect the lower amount outstanding due to our little OPs. We only get an annual printed statement in April, so maybe the DD amount will decrease then?

Is there something we can do to make the most of this situation? For example if our monthly DD goes down by £50, we could increase our monthly overpayment by £50 (or more if poss!) so we are paying off the same overall? Does this mean that when our fix ends next November, the end result (decrease in term) will be the same as if they'd allowed us to do that straight away?

Have we lost out or is this all OK? Is there any other way we can make the most of where we are?

Thanks for your help, and sorry for being a bit slow when it comes to mortgages - it's all still quite new

Spiggle

northern_at_heart wrote: »

We have a 25-year repayment mortgage with Bank of Ireland, on a 2-year fixed rate (3.94%) til November 2012. Mortgage amount is approx £195K, monthly repayments £1028.

In addition we've been making small (£100/month) lump sum overpayments via SO, hoping that this will reduce the term. However I've now realised (from reading this) that we can't reduce the term while we're still in the 'promotional period' of the 2-yr fix.

So presumably at some point our monthly payments will reduce instead, to reflect the lower amount outstanding due to our little OPs. We only get an annual printed statement in April, so maybe the DD amount will decrease then?

Is there something we can do to make the most of this situation? For example if our monthly DD goes down by £50, we could increase our monthly overpayment by £50 (or more if poss!) so we are paying off the same overall? Does this mean that when our fix ends next November, the end result (decrease in term) will be the same as if they'd allowed us to do that straight away?

Have we lost out or is this all OK? Is there any other way we can make the most of where we are?

Thanks for your help, and sorry for being a bit slow when it comes to mortgages - it's all still quite new

Hi northern_at_heart,

I am not an expert! I have read through the link you posted and am confused that your standing orders have been accepted by BoI. Do you mean you've been making a monthly SO? Certainly the link page suggests that a lump sum and a monthly OP are treated differently. For instance, any lump sum is subject to a minimum of £500 being paid (followed the link at the end of the Overpayments section).

The pdf Guide seems to indicate that there is a fee for changing the term.

Can I suggest that you call BoI on the number noted and ask them the processes, the charges and what has happened to the OPs already made.

Sorry I can't be of any more help.

All the best,
Spigs

Tony_R

northern_at_heart.

Our mortage is with BoI and yes they say you cannot reduce the term, and you are correct that your monthly payment will be reduced. We decided not to do our overpayments by SO for this very reason.

Instead we may one off lump sum overpayments by debit card, but the minimum is £500. Luckily we can do this most months.

We get a letter 5-7 days comfirming your OP, what our outstanding balance is and what the new monthly payment is.

To get around the reducing monthly payment, we simply take the difference of what the new payment is and deduct it from the original payment and add that to any over payment we make. In fact we round it up a little too.

For example our orginal monthly payment was £1173. The first month we overpaid by £500. Our monthly payment then we down to around £1170. So next time we paid £503 and so on...

Now the monthly payment is down to £1148, so it would be £522 this month. In fact recently we upped the starting figure to £1200, so this month the overayment was £500 + (£1200-£1148) = £552

Hope that makes sense.