If you find yourself with some extra money, depending on your mortgage type, variable or fixed, you may be able to pay extra off your mortgage and save money by reducing the amount of interest you will pay. It could also reduce the term left of your mortgage meaning it’s paid off quicker.
With a fixed rate mortgage you may be charged a fee or penalty for paying extra, such as a percentage amount of your regular repayment. If you want to pay extra off your mortgage but are on a fixed rate this is worth discussing with your lender as there could still be savings to be made even if you do have to pay a penalty.
With a variable rate you can pay more, without a penalty, in two ways:
Pay a lump sum
You can make a large single payment off the capital part of your mortgage. This will have the effect of either reducing your monthly repayments or shortening the term of the mortgage, but either way you will repay less interest and save money. With this option it is important that you instruct your mortgage provider to pay the lump sum off the capital part of your mortgage.
If you have 25 years left on a mortgage of €220,000 at 3.5% APR and you make a lump sum payment of €10,000, you could reduce your monthly repayments by €50 and save just over €5,000 in interest.
However, if you were to make the lump sum payment and continue making the same monthly repayments you would save yourself €13,215 in interest, and your mortgage would be paid off 1 year and 9 months earlier.
Pay more each month than the agreed amount
If you can afford to pay more than your agreed monthly mortgage amount you will repay your mortgage faster and save money by paying less interest. It may be possible to make this type of overpayment by standing order or an online transfer using your internet banking.
If you have 25 years left on a mortgage of €220,000 at 3.5% APR and you can pay an extra €100 per month, you will save around €18,000 in interest and pay your mortgage off three years quicker
You can use our extra mortgage payments calculator to work out how much an increase in your monthly mortgage repayments could save you.
In accordance with the provisions of the Consumer Credit Act 1995, the following are for your attention:
Warning: Your home is at risk if you do not keep up payments on a mortgage or any other loan secured on it. The payment rates on this housing loan may be adjusted by the lender from time to time.
Note: The above notice in respect of adjustments to repayment rates will not apply during any period when the loan is at a fixed rate.
In accordance with the provision of the Consumer Protection Code (CPC) 2012 the following are for your attention:
Warning: If you do not keep up your repayments you may lose your home.
Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.
The following warning applies in the case of variable rate loans:
Warning: The cost of your monthly repayments may increase.
The following warning applies in the case of fixed rate loans:
Warning: You may have to pay charges if you pay off a fixed rate loan early.
The following warning applies in the case of debt consolidation loans:
Warning: This new loan may take longer to pay off than your previous loan. This means that you may pay more than if you paid over a shorter term