Next Steps Required Mortgage Payments

Next Steps required:

 

Step 1:

You will need to decide what is the best way to repay the monthly payments that were suspended during your Mortgage Payment Break, as well as any interest that accumulated in those six months.

You will have recently received a letter outlining your options and the cost of each, in summary:

·         It will cost you less in the long run if you pay it off bit by bit; however, your monthly mortgage repayments will increase.  

·         It will cost you more in the long run if you pay it all off at the end of your mortgage, as a result of extending the length of your mortgage term; however, your monthly repayments will increase less.

If you provide your email address within the online application, we may use this to contact you in future in relation to your payment break.

If you haven’t received your pre expiry letter and your payment break is due to expire  please refer to our mortgage FAQ’s on how to make contact and we will be happy to help. 

 

Step 2:

If you are unable to return to making monthly repayments on your mortgage you can complete and submit a Standard Financial Statement (SFS) that will allow us to see what other support we may be able to provide.

 

What is Cost of Credit?

‘Cost of Credit’ is the total amount of money that you are charged when borrowing from a credit provider. For mortgages, this is the additional amount, over and above the amount borrowed, that you pay, including interest, fees and charges over the life of the mortgage.  There is no fee or charge when you take a Payment Break.

Why is the Cost of Credit higher if you take a Payment Break? 

As we suspended your monthly repayments for three months, the balance of your mortgage is higher at the end of your Payment Break than it would have been if you had continued to make your monthly repayments without a payment break.

 

Therefore, as your mortgage balance will be higher so will the 'Cost of Credit'.  As interest is charged on your total mortgage balance, the monthly interest cost will be higher after your payment break.

How do you know how much higher the Cost of Credit will be because of this Payment Break?

The initial ‘Cost of Credit’ is calculated when you first take out your mortgage and this amount is detailed within your original loan agreement.

 

However, the Cost of Credit can change over the life of your mortgage any time an adjustment is made to your mortgage.

 

Adjustments such as moving to a higher or lower interest rate will change the cost of credit over the life of your mortgage.

 

Taking a payment break, missing a payment or increasing the term of your mortgage can increase your cost of credit while making a higher monthly repayment, paying a lump sum to your mortgage or decreasing the term of your mortgage can decrease your cost of credit.

 

Here are some illustrative examples which will help you understand how much cost of credit can increase after a Payment Break. These examples also illustrate how your decision on whether to make up the monthly repayments suspended during the Payment Break a little at a time over the remaining term or whether to make up the suspended repayments at the end of your mortgage by paying 3 (or 6 if you have a Payment Break extension) extra monthly repayments.

Example 1: Outstanding mortgage balance is €150,000. At the point of the three month Payment Break starting, there are 20 years remaining and a Standard Variable Rate of 4.3% is in place.

 

Please note it's best to view the table below using a mobile device in landscape display, or a desktop computer or tablet.

 

 

Example for Illustrative Purposes Only
Amount Owed  €150,000
Standard Variable Interest Rate  4.30%
Monthly repayment before Payment Break  €933
Remaining Mortgage Term before the Payment Break  20 years 
Option 1(A) - Spread the three months of suspended payments over the remaining term

Option 1(B) - Extend the mortgage term by three months 

N.B this option requires an extra three payments when compared to option 1(A) 

New remaining Mortgage Term 19 years 9 months  New remaining Mortgage Term 20 years
New Monthly Repayment  €950 New Monthly Repayment  €943
New total Cost of Credit  €75,260 New total Cost of Credit  €76,301
Increase in Cost of Credit  €1,374 Increase in Cost of Credit  €2,415

You can see the difference that the three month Payment Break makes compared to if you hadn’t needed the Payment Break.

 

You can also see from the table above that the increase in the ‘cost of credit’ is more if you wait until the end of your mortgage to make up the three suspended payments.

 

Example 2: Outstanding mortgage balance is €60,000. At the point of the three month Payment Break starting, there are 5 years remaining and a Loyalty Discounted Variable Interest Rate of 3.1% is in place.

 

 

Please note it's best to view the table below using a mobile device in landscape display, or a desktop computer or tablet.  

Example for Illustrative Purposes Only
Amount Owed  €60,000
Standard Variable Interest Rate  3.10%
Monthly repayment before Payment Break  €1,081
Remaining Mortgage Term before the Payment Break  5 years 
Option 1(A) - Spread the three months of suspended payments over the remaining term

Option 1(B) - Extend the mortgage term by three months 

N.B this option requires an extra three payments when compared to option 1(A) 

New remaining Mortgage Term 4 years 9 months  New remaining Mortgage Term 5 years
New Monthly Repayment  €1,142 New Monthly Repayment  €1,089
New total Cost of Credit  €5,105 New total Cost of Credit  €5,351
Increase in Cost of Credit  €258 Increase in Cost of Credit  €504

This example shows that the increase to the monthly repayment is relatively greater than the increase in the first example if you choose Option 1(A) when there is a short term remaining on your mortgage in this second example. However, the increase in the ‘cost of credit’ is relatively lower in this second example because you are paying interest for a shorter period as the remaining term is less.  

 

Please tick to confirm you have received your pre-expiry letter and that you have read and understood all of the information provided to you in the letter

 

If you don't understand any of the information in your pre-expiry letter, please email us to request a call back.

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