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National solidarity v mortgage .

  • 20-07-2010 10:22pm
    #1
    paulyt33
    Registered Users, Registered Users 2 Posts: 25 ✭


    Have i got my sums right , the following are a rough calculation but it seems to me a no brainer ...

    If i was to draw down a mortgage now for say 100k , at a variable rate todays rate of 2.75% cost over 10 yrs would be approx 14 k ,

    if i was to put that money into a NSB , the savings would be 48 k interest ,

    NSB 100k .......profit 48 k
    -mortgage cost .........14 k.
    Profit ......................34 k , are my sums totally wrong , surely other people have noticed this ????
    Am i on to something , I know i have made a few presumptions but the basic tenet is as stated...


Comments

  • #2
    pocketdooz
    Registered Users, Registered Users 2 Posts: 1,559 ✭✭✭pocketdooz


    paulyt33 wrote: »
    Have i got my sums right , the following are a rough calculation but it seems to me a no brainer ...

    If i was to draw down a mortgage now for say 100k , at a variable rate todays rate of 2.75% cost over 10 yrs would be approx 14 k ,

    if i was to put that money into a NSB , the savings would be 48 k interest ,

    NSB 100k .......profit 48 k
    -mortgage cost .........14 k.
    Profit ......................34 k , are my sums totally wrong , surely other people have noticed this ????
    Am i on to something , I know i have made a few presumptions but the basic tenet is as stated...

    You need to be buying a property to get a mortgage - banks won't just loan you €100,000 at 2.75% (i.e. you need a physical property to draw the mortgage down against ) .....

    Also, 2.75% interest on €100,000 is €2,750 per annum so €27,500 over 10 years, not to mention the fact that you need to make principal repayments also .... or the fact that you won't get a 2.75% mortgage anymore and rates are likely to rise over the next 10 years from where they are now ....

    Finally, if I'm not mistaken the NSB yields 40% over 10 years, not 48% ...

    No such thing as a free lunch unfortunately ...

    ...


  • #3
    paulyt33
    Registered Users, Registered Users 2 Posts: 25 ✭paulyt33


    Ok , hw bout this , i'm building an extension cost approx 100k , and have 100k in the bank , then by my reckoning , if i deposit my 100k into the nsb and mortgage the extension 100k , bear with me ,

    nsb is 48% so..................profit 48k
    -mortgae loan 2.75 %(aib)..........27500
    overall profit still..................... E11500 (not to be sneezed at )

    I'm not counting the principal payments , if we are , then the above sum is 148k-127500 , same answer ..
    Obviously the profit would be double if the loan and deposit were doubled to 200k
    Problems with my theory start arising if the interest rates rise as you correctly state they will ,
    But still ........


  • #4
    soddy1979
    Registered Users, Registered Users 2 Posts: 284 ✭✭soddy1979


    10 year fixed rates are already north of 4% per annum. NSB is a net 47.5% over 10 years, or 3.96% per annum.

    Government ten year is yielding over 5% in the market at the moment. You could buy that instead, but then again there is a reason these bonds yield almost 3% more than German Government bonds.

    No arbitrage here I'm afraid.


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