mortgage question

galwaydude

Just have a quick question.
Whats the best timeframe for a mortgage, 25 or 30 yrs. I know the 30 yrs is better as you pay less each month but is that the only advantage.The reason why i ask is because me and my GF have just bought a house through BOI over 25 years and the repayments work out at 1200 euro a month for the first yr and then 1300 after that.Our mortgage advisor never mentioned the 30 years and now we are stuck with a large mortgage to pay off.Also who are the best for getting house insurance as well.Any ideas would be great.

Captain Trips

galwaydude wrote:

Just have a quick question.
Whats the best timeframe for a mortgage, 25 or 30 yrs. I know the 30 yrs is better as you pay less each month but is that the only advantage.The reason why i ask is because me and my GF have just bought a house through BOI over 25 years and the repayments work out at 1200 euro a month for the first yr and then 1300 after that.Our mortgage advisor never mentioned the 30 years and now we are stuck with a large mortgage to pay off.Also who are the best for getting house insurance as well.Any ideas would be great.

In the short term a longer term (getting words mixed up here!) mortagage will be easier to pay - it will cut off maybe a hundred or a few from the total monthly bill. This might be helpful when you start paying back initially but then after a year or so, you adjust your finances to include a repayment and it's better to then cut back to 25 years or 20 years because basically you'll stop including paying the bank a crapload of interest on it.

So yeah, you should start off at 30, or even 35 to make it less painful to start with and then reduce to 20 ASAP, prob after 12-18 months. Remember that it can seem like things are set in stone but you basically have a big loan and are able to chop and change between providers/lenders.

JUst keep on top of ****. Also, you'll prob see at this stage that the banks get a big fat cut. A €300k mortgage will have you repaying around €550k over the term (depending on rates and term of course). Ease your own pain to start with, but swicth to say ECB tracker rates which of course are more risky if rates go up a lot, etc., . Basically, you'll just have to keep on top of things and likly rate changes, etc., .

So yeah, 30 years is better if you want to pay less each month, but that extra 5 years of repayments - work it out. You pay what maybe 150 less a month but are paying back a 1200/month payment for 60 extra months, eh? Banks always win anyway but make it difficult for them. Pay back as much as you can when you get on your feet with the repayments - it may seem high now but take into account salary increases, etc., .

sceptre

Nice vague answer from me.

Depends on how much your loan is (I'm not asking btw) and depends on how much you can afford to pay off each month. The shorter the mortgage the cheaper it works out for you in the long run. Put simply (and please keep in mind I'm not a financial advisor and haven't any desire to become one), the repayment schedule for your mortgage should be kept as short as you can afford it to be on a monthly basis, with a little prudence coming into play as well.

I wouldn't say that 30 years is better than 25 years at all. 30 years is a second choice if you can't afford (or won't afford) the repayments over 25 years on the size of the mortgage you choose. Or it's a choice based on convenience if you feel like paying a lesser amount for longer that will amount to a larger amount in total.

The only advantage of a 30 year as opposed to a 25 year mortgage is the smaller payments per month. The disadvantages are that it'll cost you more in total and you've get to own your house on your own five years later (obviously you have to keep making a payment for an extra five years as well)

Can you afford to make your repayments at 1200/1300 a month? If you can, good for you, you're better off.

A Dub in Glasgo

I would agree with what sceptre says. If you can afford to reduce the term, do it. I took my mortgage out over a 20 year term as I could afford the extra. I now have 14.5 years left

If you cannot afford it, obviously you need to borrow what you can afford over a term that is reasonable to you.

De Rebel

There is no one awnser to fit all, but what Sceptre says is spot on. In 90% of cases the shorter the term the better. If you can manage the repamyents, and still have a life, stick with your current repayment level. If not see if you can cut else where. Extending the period should be a last resort and only necessary if you are under real pressure (having to cut back on essentials or work silly hours). You will be amazed how you will adjust after about 12 months.

Also bear in mind that you should consider the optin to transfer your mortgage every few years. It costs nothing to look around and see if there are savings.

Another option to consider for those with large repayments is fixing for 2/3 years. This is usually a little more expensive, but gives peace of mind that the rates wont suddenly go up and catch you at a bad time.

I started with a 20 year mortgage in 1998, which appeared quitre daunting at first, but through good fortune managed to up my repayments and cut 4 years off it last year. Only 9 years to go..........

House Insurance: Many people start and leave their house insurance with their mortgage provider. There is no obligation to do so and it usually costs you money. Look around, Household Rates vary considerably and there are substantial savings to be had. Try online, try a broker or two and try the insurers direct.

Banjo013

I'd say take the 30 year option for your first mortgage. The payments are lower which will firstly help you afford a home to get on the ladder, while also giving you a few extra quid each month to buy bits and pieces for it ... and maybe a pint or two !

For the insurance - try FBD. I'd tend to keep away from the mortgage provider - they're usually more expensive. I tried practically every company I could find on the market about 6 months ago and FBD came out at about half the average of the others.

FBD are really good for motor insurance too by the way. (no - I don't work for them !).

yankinlk

A Dub in Glasgo wrote:

I would agree with what sceptre says. If you can afford to reduce the term, do it. I took my mortgage out over a 20 year term as I could afford the extra. I now have 14.5 years left :)QUOTE]

Such a european concept. Great, in 14 years then what do you do? Why do people believe the best thing in life is to own their house and owe zero money to the banks? The cheapest money you will ever borrow is house money.

Ever heard of the saying "House Poor". Yeah, your sitting on a 300-500+ K euro house that you own outright but you got squat in the bank and have never taken a vacation.

A better philosophy is to die owing the most money...

Well maybe not exactly, but this idea of "first one to pay off the mortgage wins" is funny.

A Dub in Glasgo

yankinlk wrote:

Such a european concept. Great, in 14 years then what do you do? Why do people believe the best thing in life is to own their house and owe zero money to the banks?

My kids will have grown up so I will probably sell the property to get something smaller and have a bit more money to do what I want to do when I retire. Maybe I can retire early with my pension and the proceeds of the house.

Do you want me to pay the bank more money than I need to?

The cheapest money you will ever borrow is house money.

Not if you are paying it back over a longer term than you need to

Ever heard of the saying "House Poor". Yeah, your sitting on a 300-500+ K euro house that you own outright but you got squat in the bank and have never taken a vacation.

Yep, that is why I will sell it and move somewhere smaller.

A better philosophy is to die owing the most money...

If that is the way you want to live your life, good luck to you

Well maybe not exactly, but this idea of "first one to pay off the mortgage wins" is funny.

Why?

samo

I'm definitly of the opinion that if you can you should choose a term as short as you can afford to repay - eg 20 years! Having said that though, it makes a massive difference even if you do go down the 30 year term route if you can start paying back say an extra 100 euro p/m of the mortgage (if on a variable) it will considerably shorten the mortgage.

If you decide to do this (eg go for longer term but increase payments when you can afford to) then do ensure that the bank actually take it as an overpayment and dont just leave it there in credit becuase this wont have very much affect unless they recongnize it as overpayment on the overall term!

AntiRip

yankinlk wrote:

A Dub in Glasgo wrote:

The cheapest money you will ever borrow is house money.

so paying back double for the loan is cheap? you pay all the interest at the start of the mortgage. when i was paying e500 mortgage, e340 was in interest - fact. i have the statement to prove it.

0utshined

AntiRip wrote:

so paying back double for the loan is cheap?

Well obviously not but that wasn't what he said. He said The cheapest money you will ever borrow is house money. and I'd agree with him. If you have a mortgage at, say, 3% and can get a return of 10% p.a. then it would make more sense to invest any excess you can afford at 10% and then be in a position to pay off a lump sum later on.

AntiRip wrote:

you pay all the interest at the start of the mortgage. when i was paying e500 mortgage, e340 was in interest - fact.

I don't know the details of your mortgage but that certainly isn't the case with mine. At the start most of the payment was going towards the interest but that was because there was more of a balance outstanding at the start. As time goes on the amount going towards the balance increases and the portion paying interest decreases.

YMMV,
0.

Captain Trips

yankinlk wrote:

A Dub in Glasgo wrote:

I would agree with what sceptre says. If you can afford to reduce the term, do it. I took my mortgage out over a 20 year term as I could afford the extra. I now have 14.5 years left :)QUOTE]

Such a european concept.

Au contraire, it is a very American thing. Europeans rent more and have 99 year mortgages (e.g., swizterland). It is the American thing to have a 10 year mortgage and "own your own home" with shotguns included.

Personally, I agree with your philosophy. All it requires is a bit of financial education and juggling skills and your grand. The more money of the banks I can get the better. Heck, if you own your own place you'd probably also be the type to hoard all your money in a cash account instead of investing it.

Some people, I guess..............

The sooner people realise that the world is built on credit the better. We are l;ong past the stage of absolute financial control. You don't buy a car with cash, nor a house. The modern bank concept allows spreading of debt over longer term but it relies on creating stable economic situations. This is how Americans got so "rich". This is why Ireland is so "rich" - we have a stable economic environment and are thus deemed good credit risk by the powers that be.

You are what you are *worth*, not what you *have*. You have a better financial status if you have 11 empty credit cards because it means you've been given credit for e.g., 50 grand in total of credit. Thus, you will be either a player of the game, or not.

nlgbbbblth

a mortgage does not have to be taken out for a 'round' term

i.e. 11, 12, 17, 26, 29 years are permissable -

RainyDay

yankinlk wrote:

Such a european concept. Great, in 14 years then what do you do? Why do people believe the best thing in life is to own their house and owe zero money to the banks? The cheapest money you will ever borrow is house money.

I want to clear my remaining modest mortgage asap in order to ensure that my family have a roof over their heads, regardless of what happens in the future. No-one has a guaranteed job for life these days. Those taking out 30 year mortgages when in their 30's are consigning themselves to be stuck on the treadmill of the rat race into the 60's, which isn't what I want out of life.

Nermal

Captain Trips wrote:

You don't buy a car with cash, nor a house.

what? a lot of people buy a car with cash, and if I could have bought my house with cash I certainly would have.

Captain Trips wrote:

You are what you are *worth*, not what you *have*. You have a better financial status if you have 11 empty credit cards because it means you've been given credit for e.g., 50 grand in total of credit. Thus, you will be either a player of the game, or not.

How much credit you have access to is nothing to do with what you are worth.

yankinlk

RainyDay wrote:

I want to clear my remaining modest mortgage asap in order to ensure that my family have a roof over their heads, regardless of what happens in the future. No-one has a guaranteed job for life these days. Those taking out 30 year mortgages when in their 30's are consigning themselves to be stuck on the treadmill of the rat race into the 60's, which isn't what I want out of life.

If thats what I felt about work I would go insane. I couldnt imagine not working. Ive seen guys at 20 talking about when they can retire in 30 years and they will only be 50... that seems like a recipe for disaster. Then I have seen men healthy enough to work into their late 60's - these guys are usually gentlemen, wore a tie all there lives, dependable upstanding men that have acheived things in life (maybe small things like earning respect - not necessarily bldg things).

Treadmill though...nah I would lose it if I had to stay away from work and find something to do, basically become a full time consumer. Id rather produce into my late years, hopefully thats longer than 70 ... besides at that age ill be too ugly to lay on a beach in a bikini anyway.

lomb

if u have the restraint and are earning good money the best mortgage is a floating cheque book mortgage on a deposit account. as ur deposit account goes up u owe less and pay less interest. u could theoretically repay it years earlier this way.

Pataman

from my calculations, and they are rough, you will save approx €30k over the life of the mortgage by paying it over 25 years. Have a look at mortgage advisor on www.othersoft.co.za I use this occasionally to see my finances and how much i will save by paying extra when i have it.

RainyDay

lomb wrote:

if u have the restraint and are earning good money the best mortgage is a floating cheque book mortgage on a deposit account. as ur deposit account goes up u owe less and pay less interest. u could theoretically repay it years earlier this way.

Only if the rate you are paying is competitive. A lower rate standard mortgage may well be a better option. Don't be taken in by the advertising.

RainyDay

yankinlk wrote:

If thats what I felt about work I would go insane. I couldnt imagine not working. Ive seen guys at 20 talking about when they can retire in 30 years and they will only be 50... that seems like a recipe for disaster. Then I have seen men healthy enough to work into their late 60's - these guys are usually gentlemen, wore a tie all there lives, dependable upstanding men that have acheived things in life (maybe small things like earning respect - not necessarily bldg things).

Treadmill though...nah I would lose it if I had to stay away from work and find something to do, basically become a full time consumer. Id rather produce into my late years, hopefully thats longer than 70 ... besides at that age ill be too ugly to lay on a beach in a bikini anyway.

Just out of curiousity, do you have a family? For me, everything changed since my daughter came along. I could quite happily spend every waking hour in her presence if I didn't have to earn a crust. [I'm well aware that the time will come when the last thing she wants to do is spend time with her crusty oul fella, but for the time being, she enjoys every hour with me as much as I enjoy it with her].

But even ignoring that, there is a lot more to my life than work. I could quite easily fill 40 hours a week with community & voluntary work, though I confess that if I did win last night's lotto, I'd probably only fill 20 hours a week with that stuff! Don't get me wrong - I enjoy my job. It excites & challenges me - though it is occasionally frustrating. But I'd give it up tomorrow if I wasn't depending on the money.

yankinlk

RainyDay wrote:

Just out of curiousity, do you have a family? QUOTE]

i do, and the last thing id ever want to teach them would be to be a layabout. balance. the way i look at it, if im not working im consuming. gotta produce.

RainyDay

yankinlk wrote:

i do, and the last thing id ever want to teach them would be to be a layabout. balance. the way i look at it, if im not working im consuming. gotta produce.

Nothing that I wrote could be interpreted as being a 'layabout'. If you find it impossible to stop work without consuming, you really do need to take a hard look at your life.

LFCFan

I reckon if you have no intentions of living in the house for the term of the loan, taking out a 30 year mortgage would be better as the payments would be lower for the time you are there??

yankinlk

RainyDay wrote:

Nothing that I wrote could be interpreted as being a 'layabout'. If you find it impossible to stop work without consuming, you really do need to take a hard look at your life.

If you arent working/producing... then you are consuming. simple as that. Try it yourself, prove me wrong.

0utshined

That's a non sequitur. Just because you aren't working doesn't mean you are consuming.

Having said that though I'm similar to yourself in that I can't imagine not working at something, either in a job or for myself.

MorningStar

yankinlk wrote:

Such a european concept. Great, in 14 years then what do you do? Why do people believe the best thing in life is to own their house and owe zero money to the banks? The cheapest money you will ever borrow is house money.

I don't agree with your whole principle I think you might have a point about home ownership in Ireland . We have the higest home ownership in the world.

http://www.nationmaster.com/graph-T/peo_hom_own

yankinlk wrote:

A better philosophy is to die owing the most money...

Well maybe not exactly, but this idea of "first one to pay off the mortgage wins" is funny.

Probably not the best philosphy in the world as you will be in debt before you die and probably have little or no earning potential so will be crippled by debit. If you die before then you will find that the debt will be passed on to your family. The quicker you attack your mortgage can save you years in the future. 2 tuff years can save you 7 years later. It gives some the option to retire earlier, it's not funny just a different way to do your finanaces.

The floating mortgage accounts can be a happy option especially if you are sell employed and pay your tax once a year. Imagine your tax reducing your mortgage!