Saving/Applying for a mortgage 2015/16/17/18/19

scarepanda

We have the same dilemma at the moment, and were erring on the side of the 5 year term.

Our reasoning is that it gives some stability and no surprises for the duration. We have a young family, single income and were looking at 'forever' type homes rather than a starter home, so don't have any plans on moving any time soon. Buying a house will take up pretty much all of our savings and we'll only be left with a small rainy day fund. So having no surprises for 5 years will help build up our savings again. We hope to be able to put aside some extra every month for the 5 years as a rainy day mortgage fund or to use as a lump-sum payment at the end of the term. We'll also see if we can get better rates once the term expires.

AndreaSoly

When we were looking for a mortgage we definitely knew that we are looking for a fixed term mortgage for as long as we can. When you search on the mortgage market you can only find a very few banks who offers the 10 years. My friends suggested to us to get 5 years only with the best rate. But we decided to pick the 10years with a higher rate. Why?
Just a quick calculation:
Lets say we need to borrow € 292,000, for 25 years, we are first time buyers etc..
Currently the best offer for 5 years is €1,354/month with 2.8% interest rate and 3.5% APRC. No cash back comes with this offer.
While if we go with the best offer for 10 years is €1,461/month with 3.5% interest rate and 3.7% APRC. Comes with 2%+1% cash back offer. That means if you evenly split the 2% cash back ( €5,840) for the first 5 years, you will pay € 1,363/ month (just 9 euros more than with the best offer). Continue with the following 5 years and split the 1% cash back ( € 2,920) to the next 60 month monthly repayment will be € 1,412/month.

We felt it safer option than to go for a shorter therm, specially if you are planning a family, kids etc and it will takes lot's of money from your budget.
If you are lucky after the 5 years fixed term you can get an even better interest rate, but can go worse and pay much more.

It's all depend on your requirements, what's more important.

ELM327

Interest rates will not fall much further, likelihood of rise is more likely than likelihood of fall, therefore fixing for as long as possible is in your best interest (pardon the awful pun)

zreba

ELM327 wrote: »

Interest rates will not fall much further, likelihood of rise is more likely than likelihood of fall, therefore fixing for as long as possible is in your best interest (pardon the awful pun)

If large hikes would be on the horizon, banks would price them accordingly. They do their homework. It's a gamble really. We may as well end up in multiyear low rates (some growth and low inflation).
The rates in Ireland are still super high comparing to the ECB rates and more than double the rates available in other eurozone countries, so there's definitely a space for moving them down.

I'd say, if you enjoy stability then go for a long term fixed rate, if you're more a gambler type then you can give a try and pick a short term fixed contract.

GingerLily

zreba wrote: »

If large hikes would be on the horizon, banks would price them accordingly.

That's not how it works! They essentially lend against your money when you fix for the same term, so it's the rate they can borrow on the market plus costs.

zreba

GingerLily wrote: »

That's not how it works! They essentially lend against your money when you fix for the same term, so it's the rate they can borrow on the market plus costs.

They borrow, but from who? From other banks. On what terms? If large hikes in near future would be a given then a 10 year fixed rate would be touching the roof.

Glen_Quagmire

Still trying to make a decision on what rates and term

Going fixed for 5 years seems to be the advise on here which I understand due to the uncertainty around how the rates will go which is more likely up than down.

However, I will be paying approximately 400 euro a year more going 5 year fixed than I would going 3 year fixed.

Is the extra 400 a year (1200 total over 3 years) worth the extra security for the additional 2 years fixed at 3.2%, that's the question I need to answer...

bri007

We went with KBC 3 year fixed 2.65%, we were contemplating going with the 5 but decided to go 3 for now.

We just wanted to have the exact same amounts going out each month so we could budget for anything else we needed. After the 3 years hopefully in better paying jobs etc and have a better idea then to fix again or move banks

Wexy86

Looking for some feedsback on the next steps when purchasing , received eviction notice in rented property this week so need to understand who to chase to move things along on a house we’re buying.

So paid booking deposit and valuer from bank was out yesterday, surveyor sorted and no issues. What happens next? I’ve emailed estate agent, bank and solicitor this morning looking for guidance on nect steps but would welcome your own experience. When should I expect a date to be agreed? Thanks!

scarepanda

Is there any bank that we should be wary about regarding taking out a mortgage? There's been stuff in the media about some banks doing mortgage sell offs and rumours of others leaving the market (I think that was last year though).

mur223

Myself and my boyfriend are buying a house off the plans, told it would be ready by July and we just got approval from Ulster Bank today. So that gives us 6 months to drawdown the mortgage.

Im just wondering for whatever reason if the house isn't ready until Sept/Oct, are we able to draw down the mortgage before hand rather than re applying and going through the whole process again? We would be willing to start paying the mortgage before its ready.

Any help would be much appreciated,
Thanks

Glen_Quagmire

bri007 wrote:

We went with KBC 3 year fixed 2.65%, we were contemplating going with the 5 but decided to go 3 for now.

bri007 wrote:

We just wanted to have the exact same amounts going out each month so we could budget for anything else we needed. After the 3 years hopefully in better paying jobs etc and have a better idea then to fix again or move banks

That's a good rate but I preferred the option of 3% cashback from BOI which works out better for us

GingerLily

Glen_Quagmire wrote: »

Is the extra 400 a year (1200 total over 3 years) worth the extra security for the additional 2 years fixed at 3.2%, that's the question I need to answer...

That's really your own decision! I'm risk adverse so I fixed for 5 years, particularly because I imagine my family circumstances in the next 5 years might cause some financial stress and I'd like some certainty.

If you don't need that certainty then 3 years might be a better option for you!

GingerLily

mur223 wrote: »

Myself and my boyfriend are buying a house off the plans, told it would be ready by July and we just got approval from Ulster Bank today. So that gives us 6 months to drawdown the mortgage.

Im just wondering for whatever reason if the house isn't ready until Sept/Oct, are we able to draw down the mortgage before hand rather than re applying and going through the whole process again? We would be willing to start paying the mortgage before its ready.

Any help would be much appreciated,
Thanks

I don't think they banks will give out the mortgage before the final valuation which generally happens after snagging.

Its probably easier to reapply, is there any reason you don't want to reapply?

bored_newbie

Glen_Quagmire wrote: »

Still trying to make a decision on what rates and term

Going fixed for 5 years seems to be the advise on here which I understand due to the uncertainty around how the rates will go which is more likely up than down.

However, I will be paying approximately 400 euro a year more going 5 year fixed than I would going 3 year fixed.

Is the extra 400 a year (1200 total over 3 years) worth the extra security for the additional 2 years fixed at 3.2%, that's the question I need to answer...

We went with 10 year fixed at 3.3% plus 3% back from Bank of Ireland before Christmas. I believe the fixed rate has gone up slightly since then.

The reason I chose it was because I like certainty. On the face of it, we are paying a bit more for the loan but who knows if that is actually the case? We could have fixed for three years and then came out of it and potentially have to pay a much higher rate.

Having said that, I am not an economist. If I had felt informed and confident about predicting how interest rates will go over the next ten years, then maybe I would have chosen a different rate. But I'm not, and I don't trust the ones who say they are

You could potentially save money by fixing short-term and re-assessing at the end of each fixed term but personally I'm happy that I fixed at an okay rate and don't have to think about my mortgage beyond whether there is enough money in my account.

Captain Flaps

Yeah, if you're happy with the rate you got and the period it covers then it doesn't really matter if you could have got it cheaper at some other point, a 10 year fixed rate is very much set-and-forget. We fixed for 5 years at 2.6%, could have gone 10 but the fixed rate was that little bit higher than we wanted to pay at the time. Could come to regret it in 2023!

ELM327

zreba wrote: »

If large hikes would be on the horizon, banks would price them accordingly. They do their homework. It's a gamble really. We may as well end up in multiyear low rates (some growth and low inflation).
The rates in Ireland are still super high comparing to the ECB rates and more than double the rates available in other eurozone countries, so there's definitely a space for moving them down.

I'd say, if you enjoy stability then go for a long term fixed rate, if you're more a gambler type then you can give a try and pick a short term fixed contract.

Ireland is a basket case as you need to not only price each mortgage to give significant margin over the ECB and interbank rates, you also need to account for bad debts because banks cannot repossess in Ireland (look at recent KBC cases for instance). In essence you could break down your mortgage rate into 3 components:


(ECB rate) + (bank margin)= X
(bad debt provision = Y



Where Y generally equals approx 2X and is the Irish premium for our socialist banana republic where even if you don't pay your mortgage nothing will happen.


In central europe you can fix for 30 years below 2%. You know, where there is actually personal responsibility.

MrMojoRisin'

Has anyone ever been burned by going variable in the past? Everyone here is saying to go fixed, and I just would like to see some history of rates, some evidence that they have been hiked in the past and people have been hit with a rate too high for them unexpectedly.

Maybe this is naive, but could you potentially go variable for a few years overpaying a chunk every month. And then once it looks like rates are going up, fix at the current rate at the time?

Amirani

GingerLily wrote: »

That's not how it works! They essentially lend against your money when you fix for the same term, so it's the rate they can borrow on the market plus costs.

Banks will hedge your fixed rate out the curve with Interest Rate Swaps. The price of Interest Rate Swaps at different points along the curve very much represents market expectation of future rates - so the pricing of fixed rate mortgages for banks very much include future rate forecasting (as well as their costs and margins).

Mickiemcfist

MrMojoRisin' wrote: »

Has anyone ever been burned by going variable in the past? Everyone here is saying to go fixed, and I just would like to see some history of rates, some evidence that they have been hiked in the past and people have been hit with a rate too high for them unexpectedly.

Just google historical interest rates, anyone who didn't fix prior to rises, got burned...

AndreaSoly

mur223 wrote: »

Myself and my boyfriend are buying a house off the plans, told it would be ready by July and we just got approval from Ulster Bank today. So that gives us 6 months to drawdown the mortgage.

Im just wondering for whatever reason if the house isn't ready until Sept/Oct, are we able to draw down the mortgage before hand rather than re applying and going through the whole process again? We would be willing to start paying the mortgage before its ready.

Any help would be much appreciated,
Thanks

My understanding is, if the house will not be built within 6 months you will have to reapply for mortgage. You won't get the draw down before the house is built, because the investor (bank) will requires a valuation before the draw dawn and if the house is not built yet, you can't get a valuation..

Amirani

MrMojoRisin' wrote: »

Maybe this is naive, but could you potentially go variable for a few years overpaying a chunk every month. And then once it looks like rates are going up, fix at the current rate at the time?

If you move to a situation whereby variable rates are going up, then your fixed rates are going to be priced an awful lot higher than they are at present. In fact, it's likely that fixed rates will be more expensive than variable rates when that happens.

Glen_Quagmire

Probably a silly question but is there anyway banks will negotiate with the interest rates to get your business?

JJJackal

Glen_Quagmire wrote: »

Probably a silly question but is there anyway banks will negotiate with the interest rates to get your business?

I am not sure this was even a thing in boom times

awec

MrMojoRisin' wrote: »

Has anyone ever been burned by going variable in the past? Everyone here is saying to go fixed, and I just would like to see some history of rates, some evidence that they have been hiked in the past and people have been hit with a rate too high for them unexpectedly.

Maybe this is naive, but could you potentially go variable for a few years overpaying a chunk every month. And then once it looks like rates are going up, fix at the current rate at the time?

Maybe, if you get exceptionally lucky with your timings, otherwise by the time it's obvious there's a rate hike on the way the banks will have already hiked the fixed rates.

The carrot with variable rate is if the rates stay the same or the rates drop then you're a winner. Rates right now are at the lowest they've ever been.

zreba

awec wrote: »

Maybe, if you get exceptionally lucky with your timings, otherwise by the time it's obvious there's a rate hike on the way the banks will have already hiked the fixed rates.

The carrot with variable rate is if the rates stay the same or the rates drop then you're a winner. Rates right now are at the lowest they've ever been.

Variable rates are a scam. Banks can set them to whatever they want. No link to ECB rates, no link to any impartial index or authority. When banks go into trouble they can hike the rates and violently force you to bail them out.

Monife

Glen_Quagmire wrote: »

Probably a silly question but is there anyway banks will negotiate with the interest rates to get your business?

Not sure about negotiating but if you have a lower LTV, they will give you better rates. Usually at least 80% or lower.

awec

There is no way the average punter gets to negotiate mortgage rates with their bank.

zreba

zreba wrote: »

Variable rates are a scam. Banks can set them to whatever they want. No link to ECB rates, no link to any impartial index or authority. When banks go into trouble they can hike the rates and violently force you to bail them out.

You can go onto a fixed rate at any time and you can also switch your margate provider so not really no.

zreba

Ayan Prickly Road wrote: »

You can go onto a fixed rate at any time and you can also switch your margate provider so not really no.

Believe me, when the things go south in the economy and banks urgently need money, switching a mortgage provider will no longer be an option nor fixing on reasonable terms.