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Is it possible to get lower mortgage interest rate for less risk

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Comments

  • #32
    Diemos
    Registered Users Posts: 1,417 ✭✭✭Diemos


    Feisar wrote: »
    Agreed however lets say one borrows 160K, they will pay back 240K. A great way of "investing" 100K would be to only borrow 60K and pay back 90K. Only an example, I don't even know if banks give 60K mortgages over 25 years, however do you see my point?

    I assume that the op know all this. They've just come up with a strange idea for a product that does not exist. Because it's just not a good idea.


  • #33
    phormium
    Registered Users Posts: 3,288 ✭✭✭phormium


    What you want is the old First Active offset/current account mortgage, now both long gone unfortunately, great product but very poor take up on offset mortgages in this country, people don't like change! Very common in Australia at that time too as returnees were far more likely to seek out this sort of mortgage. NIB and PTSB both had varieties of it as well.


  • #34
    Harpon
    Closed Accounts Posts: 166 ✭✭Harpon


    phormium wrote: »
    What you want is the old First Active offset/current account mortgage, now both long gone unfortunately, great product but very poor take up on offset mortgages in this country, people don't like change! Very common in Australia at that time too as returnees were far more likely to seek out this sort of mortgage. NIB and PTSB both had varieties of it as well.

    Hopefully we will see a return given the uncertain economic environment, banks will be looking at reducing their risk.


  • #35
    Harpon
    Closed Accounts Posts: 166 ✭✭Harpon


    silver2020 wrote: »
    I can get a 0.8% mortgage interest rate for the OP.

    1.5% National solidarity bond (no dirt tax) on the lump sum. Fixed 10 years

    2.3% mortgage.

    net cost 0.8% on the amount borrowed up to the lump sum value.

    Lol that’s one way I suppose. Not sure how comfortable I would be buying Irish bonds given brexit is starting soon, Ireland’s tax haven status is under serious threat, government debt is exploding due to Covid, and the new government plan on spending like its 2006! Would not be able to sleep well at night owning those bonds.


  • #36
    phormium
    Registered Users Posts: 3,288 ✭✭✭phormium


    Harpon wrote: »
    Hopefully we will see a return given the uncertain economic environment, banks will be looking at reducing their risk.


    The offset mortgage did not reduce the risk for the bank, it reduced the interest paid by the customer if used properly. In the example mentioned the 100k would remain in a separate account always available to the customer but while it was there then no interest would be payable on an equivalent amount of the mortgage thus lowering cost of credit overall while retaining savings.


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  • #37
    [Deleted User]
    Posts: 14,344 ✭✭✭✭[Deleted User]


    phormium wrote: »
    The offset mortgage did not reduce the risk for the bank, it reduced the interest paid by the customer if used properly. In the example mentioned the 100k would remain in a separate account always available to the customer but while it was there then no interest would be payable on an equivalent amount of the mortgage thus lowering cost of credit overall while retaining savings.




    I'd never heard of that. It's actually a really good idea, and would encourage saving, too.


  • #38
    L1011
    Moderators, Business & Finance Moderators, Motoring & Transport Moderators, Society & Culture Moderators Posts: 67,523 Mod ✭✭✭✭L1011


    Harpon wrote: »
    Hopefully we will see a return given the uncertain economic environment, banks will be looking at reducing their risk.

    It does not reduce their risk, as has been explained multiple times.


  • #39
    Eric Cartman
    Registered Users Posts: 26,283 ✭✭✭✭Eric Cartman


    Harpon wrote: »
    Hopefully we will see a return given the uncertain economic environment, banks will be looking at reducing their risk.

    With ever increasing pressure to not repossess homes, mortgage lending is only getting more risky, no amount of savings are going to make underwriters feel better here.


  • #40
    guyfawkes5
    Registered Users Posts: 291 ✭✭guyfawkes5


    Harpon wrote: »
    For example, if I want to buy a house valued at 250k and want a mortgage of 200k, could I say to a bank I will keep 100k of savings in a bank guarantee account with them that I can’t touch until the mortgage is paid off. And ask them to give me an interest rate of say 1.25% in return, as they would only have a max of 100k at risk on a 250k house. Has anyone tried anything like this or would banks not be interested?
    No.

    You could use the 100k to help purchase the house and hence have a lower LTV ratio, which in turn usually allows you to access lower interest rates, although no currently available interest rate will be as low as 1.25%.

    I don't believe there is an incentive structure here for the bank either, as with almost nil or even negative ECB interest rates, there is far less of an incentive to build up large deposits on their books. So the bank would presumably want to loan it back out, but your example insinuates that a there is currently a risky lending market...


  • #41
    brisan
    Registered Users Posts: 2,242 ✭✭✭brisan


    silver2020 wrote: »
    I can get a 0.8% mortgage interest rate for the OP.

    1.5% National solidarity bond (no dirt tax) on the lump sum. Fixed 10 years

    2.3% mortgage.

    net cost 0.8% on the amount borrowed up to the lump sum value.
    I have one of those bonds but at 2.5%


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  • #42
    riclad
    Registered Users Posts: 8,184 ✭✭✭riclad


    Banks have to make a profit. There's fixed rates mortgages, and there's variable rate mortgages
    Eg the interest rate can go up or down depending on market rates, I think the rate at the moment is 3.5 variable approx
    If you borrow less than 80 per cent of the house value you might get a slightly lower interest rate than a 90 per cent loan
    When a bank gives out a mortgage they are taking a risk, house prices might fall in ten years,
    The person who borrows the money might lose their job and then be unable to pay the monthly loan payment for some time
    You can go to a mortgage broker and get advice
    I Don, t think there's any way you, ll get a loan under 3 per cent interest rate
    There's a lot of pubs and shops which are closed
    Some company's will go out of business due to
    Covid crisis as their income was zero for the last 4 months so many people will lose their jobs
    Having 100k savings will help you to get a loan ,
    it might not make much difference to the interest rate you pay on a mortgage
    A fixed rate loan means the rate will stay the same for a certain length of time,
    So you know exactly how much the loan will cost per year


  • #43
    Springy Turf
    Closed Accounts Posts: 173 ✭✭Springy Turf


    riclad wrote: »
    I Don, t think there's any way you, ll get a loan under 3 per cent interest rate

    The going rate is currently 2.3% to 2.5% for fixed rate, and around 3% variable.


  • #44
    L1011
    Moderators, Business & Finance Moderators, Motoring & Transport Moderators, Society & Culture Moderators Posts: 67,523 Mod ✭✭✭✭L1011


    riclad wrote: »
    I Don, t think there's any way you, ll get a loan under 3 per cent interest rate

    I have been paying under 3% for about four years now.


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