Why am I paying so much tax on my pension?
Should I expect the bank to offer me a good deal to get this tracker off their books? Should I approach the bank myself or would I be better to engage a financial adviser to negotiate on my behalf?
Ms ME, Meath
Good for you. Finding yourself in a position to pay down debts early is always comforting. However, there are a couple of things you need to consider.
First up, is this mortgage your only debt? On a tracker rate of the European Central Bank rate plus 1.25 percentage points, this loan is undoubtedly the cheapest money you will ever borrow. If you have any outstanding debts on personal loans – such as for a car, to finance home improvement, to pay for education – or credit card debt, you should certainly pay that off first.
For the same reason, if you foresee any prospect of borrowing for such items, or anything else in the near future, you should similarly reconsider any early repayment plan. Otherwise you are only going to penalise yourself financially.
If you are certain that there are no outstanding debts or impending purchases requiring borrowing, then and only then should you consider using this money to repay your home loan.
Will the bank cut a deal in order to get the loan off their books? Possibly, but I wouldn’t bet on it.
While it’s certainly true that the bank is losing money on the loan, it’s also the case that all banks are under considerable pressure not to be seen as an easy touch as they struggle to get themselves back onto a sound commercial footing. They will see you as having had a good deal on the loan and are likely to be reluctant to enhance that further.
Still, you never get what you don’t ask for. Getting hold of their money eight years early means the bank can minimise the loss it makes on the loan. You could certainly hold out the prospect of long-fingering early repayment to consider funding other spending and see if you can get a reaction.
Should you get a financial adviser to do the talking for you? I don’t see any reason why. It’s possible that someone more proficient in dealing with financial institutions might have more chance of success in securing some form of discount for you, but it is far from guaranteed – and the cost of a financial adviser could, in any case, more that account for any benefit you receive from the exercise.