Bad time to get a mortgage?

Antilles

Hi,

My fiance and I are looking to buy a house that costs in the region of 175k. We have an 8% deposit saved up and are looking to talk to the banks at the start of next week.

We have a combined income of 4.5k/month after tax and are looking at a repayment time of 25 or 30 years, but we're totally lost when it comes to which mortgage type to go for.

I like the idea of knowing what my monthly repayments will be, so a fixed mortgage would be good, but you seem to pay less with a variable, though that can go up or down quite a bit. Is the general idea that the worse the economy gets, the more expensive the repayments get?

I've been looking at a mortgage calculator site, and it told me the best I can get is an AIB 1-year fixed mortgage, which has an interest rate of 4.09% and then a follow-on of 4.40%.

But looking at some threads from last year on boards.ie, people were talking about rates in the 3.x% range, so is now a bad time to be looking for a mortgage in general?

Thanks!

Ray Palmer

Firstly it doesn't sound like you have a deposit yet as the standard is 10%.

What people failed to understand is that interest rates were going to go up on new mortgages due to the banking crisis and repossession changes.

Low interest and trackers rates will probably not be available in Ireland for the next 5-10 years.

Ultimately those who bought in the boom may actually pay less for their property than people who buy cheaper but have a higher interest charges and less tax breaks. At least you don't have stamp duty at the same level.

So it is not a bad time to get a mortgage because it is going to be more expensive going forward as ECB will go up and the banks will charge more again on top of that.

Dortilolma

Now is as good a time as any - but you'll want more that 8% saved up. Even with the standard 10% deposit you'll need to save up around 12% taking into account solcitors fees, stamp duty and then even with all that covered our lender still wanted to see another 5K on top of everything to cover moving in costs.

We've got a fixed rate at 3.95% at the moment but we're going to variable next year (about 4.8%). We're on a 30 year term but would like to pay it off in 20 or even 15 years if we can so we'd like to put in lump sums when the opportunity arises.

To be honest I think interest rates have gone as low as they are going to and chances are they are going to rise over the next few years.


Note: I am not an expert and am giving a personal opinion that could be way off.

The_Conductor

You say you have 4.5k of after tax income between you.
Repayment capacity is one thing lenders will look at- the other is a multiple of salaries. Aka- maximum mortgage (depending on how they are applying the rules at any given point in time) might be- 4 times the principle salary, and half the secondary salary. You cannot rely on counting both salaries towards paying the mortgage indefinitely- its a taken that children will eventually appear on the scene (and if you think your mortgage is bad- wait until you see what creche fees are like!)

Killers is around these parts- he may be able to give you some pointers.