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 landsacpe display, or a desktop computer or tablet.
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 landsacpe display, or a desktop computer or tablet.
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.