Mortgage Interest rates

dar100

Hi,

I am looking to choose a interest rate for my mortgage. I am unsure yet what I want, and I really know nothing about them, I might as well be reading Chinese.

AIB have a list that they want me to choose from: http://www.aib.ie/personal/mortgages/New-Mortgage-Interest-Rates?gclid=CK-u55nlhb4CFWNz2wod2iAA5A

I would be greatful if people could provide me with some feedback, on the pro's/con's of each.

I would like to have a rate, which would provide scope to add additional money monthly to the loan, but I may not want to start this for a year or so, I was advised that the standard variable is the best rate for this???

Also would I be better off chosing the 1 year fixed rate to start off with?? if so is there any hidden charges when looking to change??? Also, I'm unsure that the fixed rate is?

Any feedback is welcomed

The_Morrigan

I would go fixed for the first year at least, this gives you a set budget for the year and you know exactly what you are paying out and when. It also gives you a chance to squirrel any 'extra' money you may have for anything that may crop up.
In my first year as an owner I had things crop up unexpectedly that I wouldn't have come across as a renter, so my squirrel fund came in very handy.

dar100

The_Morrigan wrote: »

I would go fixed for the first year at least, this gives you a set budget for the year and you know exactly what you are paying out and when. It also gives you a chance to squirrel any 'extra' money you may have for anything that may crop up.
In my first year as an owner I had things crop up unexpectedly that I wouldn't have come across as a renter, so my squirrel fund came in very handy.

Thanks The Morrigan,

So if I go for the 1 year fixed rate, that means I pay a set amount each month for a one year period, and after this I can choose to go onto another rate?? is there a charge for this?

The_Morrigan

dar100 wrote: »

Thanks The Morrigan,

So if I go for the 1 year fixed rate, that means I pay a set amount each month for a one year period, and after this I can choose to go onto another rate?? is there a charge for this?

Yes it is a fixed amount for the period (1,3,5 years) you choose.
There is no charge to then change to another rate at the end of the period, however, you don't know what the rates will be like in 12 months, so you could be better or worse off. It is a bit of a gamble.

Eldarion

Generally speaking you pay a slight premium to "fix" your interest rate. You get the benefit of having a static monthly outgoing figure which will not be affected by any changes in the variable interest rates that occur during the period of the fixed term. This means your mortgage repayments don't go up when interest rates go up but also means the repayments won't go down if interest rates go down.

It is a bit of a bet against whether or not you feel interest rates will increase over the next X years where X is the period you fix for. If you believe they will go down then definitely stay variable as you will benefit for the declining interest rates AND not have to pay the slight premium to fix.

hfallada

Eldarion wrote: »

Generally speaking you pay a slight premium to "fix" your interest rate. You get the benefit of having a static monthly outgoing figure which will not be affected by any changes in the variable interest rates that occur during the period of the fixed term. This means your mortgage repayments don't go up when interest rates go up but also means the repayments won't go down if interest rates go down.

It is a bit of a bet against whether or not you feel interest rates will increase over the next X years where X is the period you fix for. If you believe they will go down then definitely stay variable as you will benefit for the declining interest rates AND not have to pay the slight premium to fix.

There is two ways to set interest rates. Ex Ante and Ex Post. Ex ante means the borrow has no knowledge of what the rate of interest will be in a few years(its incredibly difficult to do and near impossible to get right). So the bank charges a higher rate to insure they dont get strung by a rapid unexpected increase in inflation. Ex Post is the rate after the bank knows what inflation is. The bank wont lose out on a rate increase.

I dont think think variables have any chance of going down. The ECB base rate is rock bottom. The bank will increase variables to cover the cost of their loss making trackers. There is no sign of the ECB increase the base rate(there is no eurzone inflation).

I would go for fixed and would try and fix for about 5 years. They only way variables will go down is if there is a new competitor in the irish market for mortgages and I cant see it happening in the foreseeable future.

dar100

Is it possible to top ur your loan if you are on a fixed rate?

jester77

dar100 wrote: »

Is it possible to top ur your loan if you are on a fixed rate?

That would depend on the contract, every bank would be different. But you can always ask them to add it. I have a fixed mortgage and when I got my original mortgage quote it was not included although it had verbally been agreed with my broker, went back and it was put back into the contract. I can top up once a year up to 10%.