What type of mortgage would you guys recommend to buy a house next year? Fixed (for how many years?), tracker or variable?
Fix it for as long as possible.
A ten year fix is the max. available (five is more common) and in the medium term interest rates are only going in one direction.
permanenttsb.ie/whatweoffer … restrates/
You won’t be able to source a tracker mortgage as these were phased out.
The word of caution on the fixed is sometimes there are conditions that prevent overpayment, again you should take proper financial advice before settling on an option or maybe just have a word with some dude down the pub.
I thought I read somewhere an analysis of fixed rates and the outcome was ‘generally’ you end up paying more in the long term
Generally, generally… I’d suggest you need to take an objective look at the conditions and decide whether previous time analysis series are actually that relevant in a new paradigm where all bets are off.
I would certainly fix for five years in a situation where any commercial bank is likely to raise variables to high heaven (BOI / AIB have signalled this) once the shackles are off. And they will come off.
The link between ECB rates and variable mortgages was broken a long time ago.
As few years as you can afford.
[code]Annual Payments for 100k @ 4%
Year PerYear Total Capital Total
Paid Interest
20 -7,358 -147,164 100,000 -47,164
25 -6,401 -160,030 100,000 -60,030
30 -5,783 -173,490 100,000 -73,490
35 -5,358 -187,521 100,000 -87,521
40 -5,052 -202,094 100,000 -102,094 [/code]
Fixing is kinda expensive but gives you comfort.
Cheaper if you have a contact in a treasury dept to buy a cap if the fix is fairly short.
Grumpy, can Iask if those figures are in NPV or are they the amounts that you would pay over the period regardless of the time value?
No its not discounted. Just the payments.
Cheers Grumpy,
Does anyone have a spreadsheet made up for calculating the cost of different length mortgages 20,25,30,35,40) in todays money. I can dig up my old economics notes over Christmas and work it out with a few Ps Is and ns but if someone has one handy I’d appreciate a look for maybe 3%, 4% and 5%. I think many pinsters would find the data handy over the Christmas hols.
FB2.
*Based on Mortgage for 35 years @ 2.3% APR Variable. For illustrative purposes, does not constitute a contract. If property value is less than €543,000 APR of 5.2% applies.
If property value is less than €543,000 an APR of 5.2% appliesWARNING:
Saw the above on the myhome website and it is to the right of a house add. So it appears that to purchase a particular property for X amount one would have to pay 5.2% if the property is less than €543k??? From Bank of Ireland.
I would recommend the “zero sum borrowed” mortgage, for at least two years. As the sum borrowed is zero, it will cost you nothing, and in fact you will save a lot of money as your dream home drops by another 100k.
Calculating the payments yourself is pretty easy with excel.
=Nper() is the formula for which produces the term of the loan based on inputted payments, rate, borrowings
=PMT() will give you the payments based on rate, borrowing and term
Cheers Pete,
I’ll have a lash off that during the week.
Cheers Leo.
You should be able to split the mortgage principal into two (or more) amounts
e.g. €100K @ variable rate and €100K @ fixed rate for 5 years.
With the fixed rate, you are essentially buying insurance to protect against the volatility of interest rate changes affecting your monthly repayment levels.
No one knows the level of future interest rates, but the market will price the cost of the insurance higher than the expected benefit. Ie, the insurance increases your mean expected cost but reduces the volatility of the cost. You probably can absorb some of the volatility of interest rates yourself but may want to protect against volatility on full mortgage amount, so spliting the mortgage will split the cost.
Fixed rate mortgages will have break charges, so if your circumstances change, moving for job, or emigrating, or trading up/down house you may be stuck with penatly break charges.
Variable. A fixed mortgage is a bet that you have a better idea of future interest rates than the bank. A fixed rate is a real Canny McSavvy move.
Oh god, that would be presuming that the banks are going to move variable rates in the normative fashion to which you have been accustomed historically when they have in fact decoupled completely (and are only waiting for the signal to bring the pain).
And yes, I think I do have a better idea of future interest rates than the banks. Especially Austin.
Haven’t the banks already factored in interest rate rises into their fixed terms?
A cap can leave you open to a CGT bill and Irish banks dont want or like to sell caps ( because they dont screw you enough with a cap) also you can purchase a cap using a stockbroker to buy it from a non Irish bank that way if you have to collect on it you may stand a chance of it paying out. Another thing is if your borrowing is on a variable rate and the cap tracks Euribor then you may still get screwed by the bank.
Yes they have and for my money, when you are getting into a five year fix and beyond they have undersold the likely increase.