Mortgage Incentives

Sean^DCT4

Hi all,

Trying to decide on which mortgage lender to go with. Fortunate to have approvals with 2 banks at the moment.

I am considering EBS with their 2% cashback offer on a variable-rate.

I haven't found the exact terms and conditions on the internet but does anyone know if I will be able to switch lender in a year or two without penalties?

thanks

JTMan

Most new lenders will not let you switch until you have completed 12 months with your existing lender. Hence, after 12 months, you can switch to BoI or PTSB and avail of their cashback offers and then switch again after another 12 months.

Sean^DCT4

JTMan wrote: »

Most new lenders will not let you switch until you have completed 12 months with your existing lender. Hence, after 12 months, you can switch to BoI or PTSB and avail of their cashback offers and then switch again after another 12 months.

Sounds good enough - grab the cash back and switch after 12 months.. I have to be missing something here

JTMan

Sean^DCT4 wrote: »

Sounds good enough - grab the cash back and switch after 12 months.. I have to be missing something here

Factor in legal costs into your calculations. Very few people are proactive enough to switch that often.

Rulmeq

I've a vague recollection of a claw-back if you pay off the mortgage in the first 5 years (and switching to a new mortgage would result in you paying off the old one). Also don't forget that you would be resetting the mortgage, so you would be starting off paying all the interest from the reset.

Sean^DCT4

Rulmeq wrote: »

I've a vague recollection of a claw-back if you pay off the mortgage in the first 5 years (and switching to a new mortgage would result in you paying off the old one). Also don't forget that you would be resetting the mortgage, so you would be starting off paying all the interest from the reset.

Yeah, that's a good point. 12 months of interest only payments which wouldn't even make a dent in the mortgage principal.

Chris_5339762

Claw back is now illegal, however Bank of Ireland are skirting this by giving you 2k up front and then the final 1k after three years.

brendan86

Sean^DCT4 wrote: »

Yeah, that's a good point. 12 months of interest only payments which wouldn't even make a dent in the mortgage principal.

I don't understand why people say this its the same whether you switch or stay with lender

If you get a mortgage of 200k over 25yrs @ 3% and at end of year you have 195k remaining when you switch you take out mortgage of 195k and make it over 24yrs. Payments don't change in interest rate is same.

Like I suggested to my dad to switch as he would pay lower % and get cash back. He was having none of it saying I've payed the worst of it off I don't wanna start new mortgage and pay all interest. But if you keep years and capital the same its the same regardless of bank .

JTMan

Chris_5339762 wrote: »

Claw back is now illegal

Yeah but just to be clear just because clawback does not apply that does not mean that you can switch at will. Your incoming new mortgage provider often refuses you if you have not been with the prior lender for at least 12 months.

Rulmeq

brendan86 wrote: »

I don't understand why people say this its the same whether you switch or stay with lender

If you get a mortgage of 200k over 25yrs @ 3% and at end of year you have 195k remaining when you switch you take out mortgage of 195k and make it over 24yrs. Payments don't change in interest rate is same.

Like I suggested to my dad to switch as he would pay lower % and get cash back. He was having none of it saying I've payed the worst of it off I don't wanna start new mortgage and pay all interest. But if you keep years and capital the same its the same regardless of bank .

Because interest is front-loaded. If your repayments are say 1000p/m then it's not like 30 is interest every month. In the first month of your mortgage it's likely 900 (or more), on the final months of your mortgage it would be a lot less. So after 12 payments, the vast, vast majority of the principal will still be in place, all you've done for the first 12 months is pay interest.

Do a google search online for mortgage repayment graphs, and play around with the sliders to see just how bad this can be (and also how throwing money at a mortgage can greatly reduce the interest payments too)

brendan86

Rulmeq wrote: »

Because interest is front-loaded. If your repayments are say 1000p/m then it's not like 30 is interest every month. In the first month of your mortgage it's likely 900 (or more), on the final months of your mortgage it would be a lot less. So after 12 payments, the vast, vast majority of the principal will still be in place, all you've done for the first 12 months is pay interest.

Do a google search online for mortgage repayment graphs, and play around with the sliders to see just how bad this can be (and also how throwing money at a mortgage can greatly reduce the interest payments too)

No I'm sorry you are 100% wrong. If you have 100,000 mortgage with a company at 3% over 21 yrs your repayment is 535.34euro.. At the end of yr 1 your mortgage balance is 96,528.39.

You want to switch you go to another lender get a mortgage at 3% for argument sake you take out mortgage of 96,528.39 and make it over 20 yrs (1 learn less than original). Your payment is still 535.34.

Nothing can change , A lot of people think the same way as you but its wrong. Yes the first couple of years on every mortgage you pay mostly interest but if you keep figures, term and % the same nothing changes as if you stayed with same company everything is same.

The interest you pay montly/yearly with 1st mortgage company the exact figures are same with switcher company.


I have attached 2 files to show you.

Rulmeq

brendan86 wrote: »

No I'm sorry you are 100% wrong

No, I'm not wrong, mortgages don't work in a linear manner. You can either accept that, or ignore it, but it doesn't make me wrong.


Nice graph here:
http://www.hedgelands.com/mortgages/mortgages.htm
Lots of interest at the start, lots of principal at the end. Every time you take out a new one you start off with lots of interest up front again.

brendan86

Rulmeq wrote: »

No, I'm not wrong, mortgages don't work in a linear manner. You can either accept that, or ignore it, but it doesn't make me wrong.


Nice graph here:
http://www.hedgelands.com/mortgages/mortgages.htm
Lots of interest at the start, lots of principal at the end. Every time you take out a new one you start off with lots of interest up front again.

I know there's lots of interest at the start, are you telling me if you get a 20 year loan of 200,000 and pay it for 10 years with 3% interest.

Just say your left with a balance of 120,000 after 10 years. You still have 10 yrs remaining of 120,000 . Another person goes into bank gets a loan of 120,000 over 10yrs are you trying tell me person B will pay more interest than person A going forward?

No they will be the same they owe same amount of money over same term and same interest rate.

Person A paid a lot of interest at the start because he had a bigger loan and was paying off for 10 yes but moving forward he pays the exact same interest as person B monthly and yearly as they both have same figure and term.

Same results if switching as long you keep the term of your mortgage same and the balance of mortgage you pay the same interest.

There not starting a new mortgage there basically continuing on just with a different lender.

I posted 2 graphs one with 21yrs other with 20yrs the payment never changes if you start again where you left off with same capital and term.

dubrov

Rulmeq wrote:

No, I'm not wrong, mortgages don't work in a linear manner. You can either accept that, or ignore it, but it doesn't make me wrong.

Mortgages don't work in a linear manner but i am afraid you are wrong though.

Switching a mortgage amount with the same term and interest rate should result in the same payment

Rulmeq

brendan86 wrote: »

I know there's lots of interest at the start, are you telling me if you get a 20 year loan of 200,000 and pay it for 10 years with 3% interest.

Just say your left with a balance of 120,000 after 10 years. You still have 10 yrs remaining of 120,000 . Another person goes into bank gets a loan of 120,000 over 10yrs are you trying tell me person B will pay more interest than person A going forward?

No they will be the same they owe same amount of money over same term and same interest rate.

Person A paid a lot of interest at the start because he had a bigger loan and was paying off for 10 yes but moving forward he pays the exact same interest as person B monthly and yearly as they both have same figure and term.

Same results if switching as long you keep the term of your mortgage same and the balance of mortgage you pay the same interest.

There not starting a new mortgage there basically continuing on just with a different lender.

I posted 2 graphs one with 21yrs other with 20yrs the payment never changes if you start again where you left off with same capital and term.

I looked at the second one, and thought you took 100% of the payments off. I stand corrected.

kilburn

OP I am in the process of switching to EBS and I can confirm there is no claw back