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Paying off mortgage within a year

  • 01-05-2018 10:46pm
    #1
    Closed Accounts Posts: 4,007 ✭✭✭


    Consider this scenario

    1. I get a variable rate mortgage for a 25 year period. I can avail of a cashback offer as a first time buyer.
    2. I inherit a lump sum after a few months. I pay off the mortgage entirely.

    Am I correct in thinking I only pay interest on the few months, which is potentially less than the cashback on drawdown? Do I get to keep the cashback anyway?


Comments

  • Closed Accounts Posts: 2,738 ✭✭✭Heres Johnny


    2 things to consider here which will vary from bank to bank.

    1) Terms
    2) Conditions

    Seriously though, every bank has it's own rules about claw back of cashback offers and early repayment etc. So it completely depends on the Ts&Cs attached to a contract.

    But it's an interesting opportunity for what's known as Arbitrage, a guaranteed risk free way of making money in financial transactions also known as a money machine.

    I know in my first year of mortgage my mortgage payments were approx 1000 euro a month and my interest part was about 650 or 700 of that.

    That was on a 200k loan.
    What's the cashback offer usually?
    1%? 2%?

    You'd want to be in and out pretty quick if it's possible at all.

    Those cashback offers are being seriously looked at by the regulator now too and I don't think they'll be in existence soon.
    Gimmick Anyway, a tiny tiny reduction in interest rates would be more valuable in long run.


  • Closed Accounts Posts: 2,067 ✭✭✭368100


    Yes you only pay interest on the few months.

    The central bank made a ruling a couple of years ago that banks can't clawback the cashback payments if its redeemed early


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