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Tracker mortgages?

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  • 12-03-2007 3:34am
    #1
    SouthO
    Closed Accounts Posts: 26 ✭


    Looking for someone to explain the ins and outs of Tracker mortgages in plain English. Pros and cons etc

    When a loan offer states that 110 euro is the "amount which the instalment repayment will increase by, in the event of a 1% increase at the start of the first year in the interest rate on which the above calculations are based" what exactly does this mean? And if this is for the first year what is the case for the remaining 24 years?

    My real question is I guess, for the past year if you took a normal variable rate mortgage and a tracker mortgage side by side for the same mortgaged amount how would the repayments compare?

    Thanks


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    #2
    Afuera
    Closed Accounts Posts: 619 ✭✭✭Afuera


    To answer your first question, I'm guessing that that statment means that if the European Central Bank (ECB) decides to increase interest rates from their current rate by 1%, then you will have to pay back an extra 110 EUR per month on your mortgage.

    I'd recommend you spend some time playing around with this online mortage calculator:
    http://www.jeacle.ie/mortgage/

    Input the figures that you are considering and see what happens when you change the interest rate, the length of the mortgage, etc. You'll be able to see how much the montly repayments are, what amount you are paying in interest, what amount you are paying off the capital, and plenty more.


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    #3
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    Something to note is the lending institutions often offer a discounted rate for the first year or 18 months of your mortgage (e.g. ECB + .85) thereafter it goes up to perhaps ECB + 1.05 (or whatever)). So- simply factoring in a 1% rise in their calculations may possibly be slightly disingenuous on the part of the lending institution.

    Up to now floating tracker products were perceived to be good value in comparison to fixed rate products. Thoughts on this have now changed (RBS, IIB and NIB have very good fixed term rates).

    In short, look around at the products the different institutions have on offer, and choose the one that best meets your requirements.


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