Need advice on mortgage

Daisy000

Hi,
I have invested 20k in Solidarity Bonds back in 2012. Will get back 30K in 2022 (10k profit no dirt tax).
We are in the process of buiyng a house for 260k, sale agreed. Would have 130k cash towards the price ,if I pulled out of bonds now and loose the future profit, and would need to borrow 130k. Other option is to keep the bonds and borrow 150k instead. So, after 5 years, I would take that 30k off the loan.

have been approved in principal with BOI for 130K/ 25 years already. Fixed for 3 years @3.1%.

I know BOI is not favourite/best according to this forum. The problem is we were refused by AIB already based on our work contracts ( says long term full time = key word "permanent" isn't on it ).

Is it worth my while?

thanks!

adcom

I'm not a financial advisor and i dont work in banking! But you need to work out the interest you will pay in the next 5 years on 150K Vrs 130K a mortgage.
This online tool is handy- you can get a monthly breakdown of interest vrs principal repayments and it allows you to calculate the effect a lump sum will have on the total- it allows you to say when that lump sum will be added
http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

consumerhelp.ie is a great site too to compare interest rates and to use thier repayment calculators.

essentially, there is no point earning 10K in interest if you could save yourself paying that in mortgage interest. having a smaller mortgage will also insulate you more from any interest rate changes too- although they shouldn't affect you too much with that amount anyway.
fair play for having such a large sum saved towards the purchase.

And also- i know that you have acknowledged this already but BOI rates are really not the best. AIB and EBS have the same underwriters so no point going to EBS but perhaps knock into KBC and Ulster bank. your loan to value is low and you should look for a rate that reflects that. again- the consumer help website.

good luck

Daisy000

adcom, thanks for reply
my maths isn't great (better at cooking haha) but after playing with a few mortgage calculators on line I see what will really make a difference is the 30k lump sum repay after 5 years...if I m correct...

If I borrow 150k and fixed it @3.3%, after 5 years I will be able to switch lenders with ~95k mortgage rather than ~108k (if borrowed 130k and pulled from bonds)

As I say my maths is crap and I my calculations could be complete nonsense...

mickmac76

I only looked at it roughly but I would leave the 20k on deposit for the next 5 years. The additional 20k on your mortgage will cost you €620 a year in interest, a very rough figure, so over five years you will pay an extra €3100 in interest. But this is low when compared to the extra 10k you will receive in five years time. I'm assuming in the above calculation that if you withdraw your money now you lose all the interest.

Daisy000

mickmac, thanks for reply

what about the difference (~€100) in monthly repayments? Shouldn't I add it on top of interest?

brendan86

20,000 over the 5 years at 3.1% is costing around 2,500 interest.. mickmack did his calculations on interest only which is not correct as you would be making payments on your 20,000 montly the interest would reduce montly as your paying towards capital also

Yes the extra 20,000 you need will cost you 100euro extra a month but this is another way as saving as it will come off your capital.

Then after the 5 years you can pay off 30k so you would be in much better position as you will have made extra payments and a lump sum and the interest it cost you is 2.5k

mickmac76

I agree with brendans figures above, I only did a rough calculation in my head and didn't take the falling capital into account.

Daisy000

Thanks to all

it looks like it's a good idea to keep the bonds so

Daisy000

Just one but...
It's 3.3% to fixe for 5 years actually, so does this changes the picture?

brendan86

Daisy000 wrote: »

Just one but...
It's 3.3% to fixe for 5 years actually, so does this changes the picture?

Nothing significant, maybe 200-300 over the 5 years off top of head, the only main difference is it will give you piece of mind for the 5 years knowing exactly your repayments montly and you dont have to worry about interest rates

Daisy000

thanks brendan

Daisy000

btw, how many of u think that Irish banks will drop their variable rates before ECB starts raising interest rates?

mickmac76

I wouldn't count on any drops in the interest rates unless a new lender comes into the market. I asked the question last week when would the ECB start raising rates and people on this forum taught not this year.