Top tips: Paying off fixed mortgage early could trigger hefty fee

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Louise McBride

One of the main disadvantages of a fixed rate mortgage is the early redemption fee that you could be hit with should you repay your mortgage, or change to a different interest rate, before the fixed term is up.

Check if you will be charged for repaying your mortgage early

An early redemption fee, where charged, could easily run into the thousands.

Could you overpay some of a fixed mortgage early and avoid fees?

A number of lenders allow you to overpay your fixed rate mortgage up to certain limits each year – without incurring a breakage fee. This ability to overpay a fixed rate mortgage without penalty is useful, particularly for people who earn bonuses or commission, or who come into an inheritance, according to Michael Dowling of Dowling Financial.

With ICS Mortgages’ three-year and five-year fixed rates for example, you can overpay an additional 20pc off your mortgage in any 12-month period without penalty.

With Finance Ireland, Avant Money, KBC Bank and Ulster Bank, you can overpay part of your fixed mortgage each year (of up to 10pc of the outstanding mortgage balance) without incurring a fee.

With Bank of Ireland (BoI), regular overpayments of up to 10pc of the normal monthly repayment (or up to €65, whichever is greater) can be made without triggering a break fee. Should you make a lump sum overpayment off a Bank of Ireland fixed mortgage, however, you may be hit with an early redemption fee.

With AIB, EBS, Haven and Permanent TSB, you do not have the option of avoiding an early redemption fee by sticking to certain limits when making an overpayment off a fixed mortgage.

You may therefore be hit with an early redemption fee with either of these lenders if you repay, or overpay, some of your mortgage before your fixed rate mortgage term comes to an end. However, there are some circumstances where an early repayment charge is due but is waived.

Weigh up fees versus saving – it may not be worth it

Should you be considering repaying a fixed mortgage early, overpaying it, or changing to another interest rate before the fixed term is up, weigh up any break fee that will be incurred against any savings you hope to make.

The fee could eat into your savings and so it may be better not to repay, or overpay, some of your mortgage early – or to change to a different interest rate.

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