Mortgage Advice

seamus

ShowMeTheCash wrote: »

But that being said I would say running a 4% - 8% interest buffer for the next 10 years would be sensible.

The banks are offering 10 year fixed rates under 5%, so even they don't believe that rates will go above that in the medium term.

At the moment the banks are stress testing @ 2% over the standard variable, so I do agree that budgeting for 4%-8% is about the most robust test. But 7% would be adequate.

The double-digit percentages of the 1980s are a non-concern really. It could theoretically happen, but we're part of a much larger and more stable currency now. If interest rates in the eurozone hit 16% we'd probably have a lot more to worry about than repaying our mortgages.

ShowMeTheCash

seamus wrote: »

The banks are offering 10 year fixed rates under 5%, so even they don't believe that rates will go above that in the medium term.

At the moment the banks are stress testing @ 2% over the standard variable, so I do agree that budgeting for 4%-8% is about the most robust test. But 7% would be adequate.

The double-digit percentages of the 1980s are a non-concern really. It could theoretically happen, but we're part of a much larger and more stable currency now. If interest rates in the eurozone hit 16% we'd probably have a lot more to worry about than repaying our mortgages.

OK yes you can get just below 5% fixed rate mortgage today but banks are hedging their bets.

What is the ECB rate today? 0? -0.6 or something crazy.

So a bank will do 4.8 % today
Interest rates could actually increase 4.8% before the bank will lose any money on that rate.

if the rate moved tomorrow to say 1 % the bank will adjust you would now probably get just below 6% for 10 years.

A bank will look at the 10 year spread they are gurarnteeing 4.8% now for 10 years Interest rates could go to 8% with the bank in 5 years easy (say 4% at the ecb), its not that the banks think they will stay low for 10 years, they are ensuring they make money in short and maybe make a little less in the long. But new mortages make up the short fall in the long term.

ec18

ShowMeTheCash wrote: »

.
Peoople in 2006 where getting mortgages of 10 times there annual salary!

did they really? or is that just common belief that we all went mad

ShowMeTheCash

ec18 wrote: »

did they really? or is that just common belief that we all went mad

Guy I graduated with bought a house at 200K when his salary was 20K a year.
That was 2006/2007

Trond

ShowMeTheCash wrote: »

Guy I graduated with bought a house at 200K when his salary was 20K a year.
That was 2006/2007

:eek: what a time to be alive!

Gumbo

ShowMeTheCash wrote: »

OK yes you can get just below 5% fixed rate mortgage today but banks are hedging their bets.

What is the ECB rate today? 0? -0.6 or something crazy.

So a bank will do 4.8 % today
Interest rates could actually increase 4.8% before the bank will lose any money on that rate.

if the rate moved tomorrow to say 1 % the bank will adjust you would now probably get just below 6% for 10 years.

A bank will look at the 10 year spread they are gurarnteeing 4.8% now for 10 years Interest rates could go to 8% with the bank in 5 years easy (say 4% at the ecb), its not that the banks think they will stay low for 10 years, they are ensuring they make money in short and maybe make a little less in the long. But new mortages make up the short fall in the long term.

Ulster Bank offering 7 year fixed terms at 3.99% currently.

lisademps

ShowMeTheCash wrote: »

It has happened!

What do you reckon you could afford per month?

I could probably afford 1300/1400 a month. I fully intend on renting out a room but I know the banks don't care about that.

MrWalsh

ec18 wrote: »

did they really? or is that just common belief that we all went mad

Yes, I know a tradesman and a shop assistant who had a combined income of perhaps 70k (at the time) get a 92% mortgage for a property priced at 550k. The deposit came from credit union borrowings.

The combined income is now perhaps 45k, and the property is worth ~200k. The latest deal from the bank is offering a split mortgage with half the capital warehoused until they are in their late 60s. So far in arrears they can never catch up.

So kids - dont borrow more than you can afford, no matter what the bank tells you.

marathonic

kceire wrote: »

Ulster Bank offering 7 year fixed terms at 3.99% currently.

Actually, 3.8% for below 60% LTV - which shows how confident they are that rates will remain low.

Agent Smyth

Imo for the last 20 years the people who kept the mortgages on variable rates did better then those who fixed for longer then a year

ShowMeTheCash

kceire wrote: »

Ulster Bank offering 7 year fixed terms at 3.99% currently.

Yeah this is with a 40% deposit.
Also a fixed rate you are stuck with the term, you cannot pay back early. Well you can but they will probably look for some of the interest they are now missing out on!

ShowMeTheCash

lisademps wrote: »

I could probably afford 1300/1400 a month. I fully intend on renting out a room but I know the banks don't care about that.

The bank will do their own "What you can afford".
They look at, loans, dependants monthly outgoing and what money you save from month to month.

On the plus side they will factor in your current rent payments.


Borrow 200K
1366.35 per per month at 6.5 stress rate
1123.98 per per month at 4.5 normal rate today.

Minimum to borrow 200K you will need to put down 10% call it 20K.

For the lower rate of 3.99% you will need closer to 80K deposit...

You are kind of at the max you could borrow I reckon assuming the bank argree you can afford 1300 ro 1400 a month.

Gumbo

ShowMeTheCash wrote: »

Yeah this is with a 40% deposit.
Also a fixed rate you are stuck with the term, you cannot pay back early. Well you can but they will probably look for some of the interest they are now missing out on!

Nope. We have been offered it with 10% deposit.
Obviously we can't overpay in the first 7 years but that's a given. If we have extra cash I can throw it in the savings account and decide what to do with it over the long term.

Gumbo

ShowMeTheCash wrote: »

The bank will do their own "What you can afford".
They look at, loans, dependants monthly outgoing and what money you save from month to month.

On the plus side they will factor in your current rent payments.


Borrow 200K
1366.35 per per month at 6.5 stress rate
1123.98 per per month at 4.5 normal rate today.

Minimum to borrow 200K you will need to put down 10% call it 20K.

For the lower rate of 3.99% you will need closer to 80K deposit...

You are kind of at the max you could borrow I reckon assuming the bank argree you can afford 1300 ro 1400 a month.

You won't. We are getting the 7 year fixed rate of 3.99% on a mortgage of €193,500 with a purchase price of €215k.

ShowMeTheCash

kceire wrote: »

You won't. We are getting the 7 year fixed rate of 3.99% on a mortgage of €193,500 with a purchase price of €215k.

No you will or at least most people will!
Do you work for the bank? Or do you hold a lot of savings with the bank?

LVT on 3.99 is 40% why they are giving you a better rate I don't know but this is not indicative to what is being advertised by ulster bank, nor is it what most people will get.

I also have my mortgage with ulsterbank, I put down 10% back in Aug but mine is variable not Fixed, 4.5% I think with 90% LTV.

I only borrowed 80K and salary exceeds 100K per year, I took variable rate as I will pay this off in the minimum 5 years terms you can take mortgage over.

Just one last thing are you in the North or the South? UK give better rates than ROI so 3.99 in Northern Ireland perhaps is possible I have not looked.

ShowMeTheCash

From the website:

http://www.ulsterbank.co.uk/roi/personal/borrowing/mortgages/important-information/rates.ashx

3 Year Fixed Rate <80% LTV (Fixed until 31/03/2018) 4.40%
3 Year Fixed Rate <90% LTV (Fixed until 31/03/2018) 4.50%
5 Year Fixed Rate <80% LTV (Fixed until 31/03/2020) 4.40%
5 Year Fixed Rate <90% LTV (Fixed until 31/03/2020) 4.50%
7 Year Fixed Rate <80% LTV (Fixed until 31/03/2022) 4.40%
7 Year Fixed Rate <90% LTV (Fixed until 31/03/2022) 4.60%


Actually looking at Ulster bank there are no fixed rate mortages at 3.99%

Just out a matter of interest when did you take out your mortgage kceire?


The lowest rate I see currently is

Discounted Variable <60% LTV with ufirstgold / ufirst Private discount (Standard Variable Rate* minus 0.65% for the life of the mortgage)

At 3.9% but again it requires a 40% deposit.

Gumbo

ShowMeTheCash wrote: »

No you will or at least most people will!
Do you work for the bank? Or do you hold a lot of savings with the bank?

LVT on 3.99 is 40% why they are giving you a better rate I don't know but this is not indicative to what is being advertised by ulster bank, nor is it what most people will get.

I also have my mortgage with ulsterbank, I put down 10% back in Aug but mine is variable not Fixed, 4.5% I think with 90% LTV.

I only borrowed 80K and salary exceeds 100K per year, I took variable rate as I will pay this off in the minimum 5 years terms you can take mortgage over.

Just one last thing are you in the North or the South? UK give better rates than ROI so 3.99 in Northern Ireland perhaps is possible I have not looked.

Nope, dont work for the bank, dont bank with them. I bank with PTSB.

We are getting the 3.99% fixed for 7 years on our 90% mortgage which hopefully will be drawn down in the next few weeks. Valuer is viewing the property this week on behalf of UB.

Also, we are in Dublin, not up the north.

ShowMeTheCash wrote: »

From the website:

http://www.ulsterbank.co.uk/roi/personal/borrowing/mortgages/important-information/rates.ashx

3 Year Fixed Rate <80% LTV (Fixed until 31/03/2018) 4.40%
3 Year Fixed Rate <90% LTV (Fixed until 31/03/2018) 4.50%
5 Year Fixed Rate <80% LTV (Fixed until 31/03/2020) 4.40%
5 Year Fixed Rate <90% LTV (Fixed until 31/03/2020) 4.50%
7 Year Fixed Rate <80% LTV (Fixed until 31/03/2022) 4.40%
7 Year Fixed Rate <90% LTV (Fixed until 31/03/2022) 4.60%


Actually looking at Ulster bank there are no fixed rate mortages at 3.99%

Just out a matter of interest when did you take out your mortgage kceire?


The lowest rate I see currently is

Discounted Variable <60% LTV with ufirstgold / ufirst Private discount (Standard Variable Rate* minus 0.65% for the life of the mortgage)

At 3.9% but again it requires a 40% deposit.

Their new rates are not on the website just yet. You need to talk to them in person to get the most up to date rates.

http://businessetc.thejournal.ie/ulsterbank-first-permanent-tsb-ireland-collection-1919789-Feb2015/

The benefits of these changes will be most felt by those able to produce a larger deposit.

For those seeking a mortgage for 90% of a house’s value will see a reduction of between 0.41% (7-year fix) and 0.6% (3-year fix) depending on the length of the fix.

The majority of new house buyers will be seeking mortgages of 80% loan-to-value ratio due to the new rules from the Central Bank.

On a 7-year fixed mortgage of 80% buyers will see a reduction of 0.3% from 4.20% to 3.90%.

ShowMeTheCash

OK I see they are becoming more compedative but remember from the article you are not really interested in the 3.99 rate you need to look at the APR rate as in that's what you pay.

7 year Fixed 3.99% (4.2% APR*)

So if this is the mortgage you are getting you are paying 4.2% not 3.99%

This is of course the UB one from the link you posted.

ShowMeTheCash

That being said 4.2 on a fixed 7 year is still pretty good.
That being said not hugely different to a 4.4 Variable where you can over pay!

Fixed gives you security but in the long terms its not great.
Over payment on a varible rate can greatly cut down your mortgage term but you can be subject to changes.

ShowMeTheCash

Again just to run some nunbers:

On a mortgage of 193,500
And a rate of 4.2% assuming you plan to payback in 20 years you will need to pay 1200 a month give or take.
Loan Interest
Year1 187105 8004.82 1200
Year2 180436 15735.8 1200
Year3 173481 23181.3 1200
Year4 166229 30328.9 1200
Year5 158666 37166.1 1200
Year6 150779 43679.4 1200
Year7 142555 49855 1200
Year8 133978 55678.4 1200
Year9 125035 61134.7 1200
Year10 115708 66207.9 1200
Year11 105982 70881.9 1200
Year12 95839.3 75139.3 1200
Year13 85262.5 78962.5 1200
Year14 74232.8 82332.8 1200
Year15 62730.9 85230.9 1200
Year16 50736.4 87636.4 1200
Year17 38228.4 89528.4 1200
Year18 25184.8 90884.8 1200
Year19 11582.7 91682.7 1200

You can see by the end of the 19 years rounding down you pay 91K Interest.

Making payments of 1050 a month and taking over 25 years will cost you and added 26K+

Year24 8690.85 117591 1050

I think the minute you go over 20 years for a mortgage the the amount of interest you pay back is crazy and people really need to think about that.

When you think about it on.

193500

25 years just over 120k on interest re-payment 1050
20 years just over 91k on interest re-payment 1200
15 years just over 72k on interest re-payment 1400

Taylor365

Sorry to hijack..

Is it better to:

A) Take out a mortgage over a longer length, and pay extra when possible (30+ years)

Or

Take out over a moderate length and make regular payments (15-20 years)



Taking into account there are no fees for paying back early. Always of the thought Option A is better..

Michael D Not Higgins

Taylor365 wrote: »

Sorry to hijack..
Taking into account there are no fees for paying back early. Always of the thought Option A is better..

Option A is less likely to leave you in arrears if things get tight for a few months, e.g. if one partner loses their job and is out of work for a while.

Taylor365

Michael D Not Higgins wrote: »

Option A is less likely to leave you in arrears if things get tight for a few months, e.g. if one partner loses their job and is out of work for a while.

Well, what i'm trying to ask is, if you pay back the 30+ year mortgage in 20 years, would you still pay more interest than if you took out a 20 year mortgage?

ec18

Taylor365 wrote: »

Well, what i'm trying to ask is, if you pay back the 30+ year mortgage in 20 years, would you still pay more interest than if you took out a 20 year mortgage?

probably unless you are making payments each month equal to what the 20 year would be

Michael D Not Higgins

Taylor365 wrote: »

Well, what i'm trying to ask is, if you pay back the 30+ year mortgage in 20 years, would you still pay more interest than if you took out a 20 year mortgage?

Let's say you get a 200k mortgage at 5%.

Over 20 years it would cost you 1320/month and total repaid would be about 316k.

For a 30 year mortgage, let's say you spent the first 5 years paying off the first amount, 1074/month, then aim to pay it off by the 20th year. After 5 years you owe ~183k on the principal. The remaining would be at 1447/month for 15 years. Total repaid would be 325k. You've paid 9k more than the first example but save 60k on the 30 year mortgage.

The sums will work out differently depending on how it's broken down though.

ShowMeTheCash

Taylor365 wrote: »

Well, what i'm trying to ask is, if you pay back the 30+ year mortgage in 20 years, would you still pay more interest than if you took out a 20 year mortgage?

You pay interest on what you owe.

If you pay back a 30 year mortgage in 20 years with the same payment every month i.e. it was spread evenly it will workout about the same as the 20 year mortgage give or take a few % points on the rate you get.

If you plan to pay lump sums off the mortgage the earlier you pay the lump sum the less intetest you pay in the long run.
To give an example:

Let's say you have 20K in the bank and you owe 100K on a mortgage.

You plan to pay the 20K off the mortgage next year.

So
Year 1 100K at 4.4% is 4400 interest accumualted for year 1
Pay your 20K
Year 2 80 at 4.4% is 3520

Total for the two years 7920 interest (Now we are not including actual mortgage payments just to show the example)

Paying the 20K at the beginning of year 1 saves 880..

Paying large chunks in the first 5 years will have a much greater impact than paying large chunks in the final 5 years, can actually make a big difference.

ShowMeTheCash

Taylor365 wrote: »

Sorry to hijack..

Is it better to:

A) Take out a mortgage over a longer length, and pay extra when possible (30+ years)

Or

Take out over a moderate length and make regular payments (15-20 years)



Taking into account there are no fees for paying back early. Always of the thought Option A is better..

Option A is better if the rate is the same and stays the same.
A really only better if you actually plan to over-pay else there is really no difference.