To fix mortgage or not?

Shefwedfan

I know this is probably been asked a few times. I currently have a mortgage with KBC. In fact all my banking is with KBC now because of closure of Rabo in Ireland.

I am on variable rate of 3%. I overpay the mortgage each month. It is on 30 years but I was recommended to leave on 30 year and just overpay.

I am looking at other banks with lower variable rates and wondering should I move? the mortgage was only taken out in Aug 2016

To move I would guess I need to start moving everything as it has a knock on affect(current account, savings, credit card) so not an easy task.....would end up with 2.75% off AIB....I have done this before and it takes bloody ages to move mortgage

The other option was fix the mortgage for 10 years with KBC. This will give a 2.95% rate. Or switch to Ulster and do 5 year 2.8%. This would save 1k over the 5 years.

Just looking for recommendations? should I be looking at fixed, from what I can see the market will move and variable is going to start climbing again

Thanks

jameshayes

Shefwedfan wrote: »

The other option was fix the mortgage for 10 years with KBC. This will give a 2.95% rate. Or switch to Ulster and do 5 year 2.8%. This would save 1k over the 5 years.

Just looking for recommendations? should I be looking at fixed, from what I can see the market will move and variable is going to start climbing again

Its a magic 8 ball question in my amateur opinion - variable rates have finally started falling over the last few years and we now have a good mortgage war going on. I would disagree with the statement that you think they will start to climb again - this wouldn't make sense in the middle of a customer scramble. I personally wouldn't be locking in anywhere for 10 years because it restricts you for that entire period and would limit your overpayment ability.

I have my day to day banking with one bank and my mortgage with another - there is nothing stopping you from doing the same with KBC and AIB.

Shefwedfan

jameshayes wrote: »

Its a magic 8 ball question in my amateur opinion - variable rates have finally started falling over the last few years and we now have a good mortgage war going on. I would disagree with the statement that you think they will start to climb again - this wouldn't make sense in the middle of a customer scramble. I personally wouldn't be locking in anywhere for 10 years because it restricts you for that entire period and would limit your overpayment ability.

I have my day to day banking with one bank and my mortgage with another - there is nothing stopping you from doing the same with KBC and AIB.

KBC reduce their rate if you keep current account with them.

I would have expected the rest of the banks to copy this...maybe not

cruizer101

One thing to consider is you can split a mortgage between fixed and variable so you can get the lower fixed rate but still have the option to overpay on the variable part. This would mean you could continue to overpay as you are currently doing, as most fixed either don't allow or limit the amount you can overpay by.

You would need to do you sums a bit but the general idea would be to keep as variable an amount that you will likely pay off completely over the period of the fixed term given the amount you are overpaying by.

Shefwedfan

cruizer101 wrote: »

One thing to consider is you can split a mortgage between fixed and variable so you can get the lower fixed rate but still have the option to overpay on the variable part. This would mean you could continue to overpay as you are currently doing, as most fixed either don't allow or limit the amount you can overpay by.

You would need to do you sums a bit but the general idea would be to keep as variable an amount that you will likely pay off completely over the period of the fixed term given the amount you are overpaying by.

Interesting concept.

So I looked at KBC and they will offer me 3 year fixed at 2.8%

So you are saying, if I had 200k mortgage and over 3 years with overpayment I expected to pay off 20k. Then fix 180k and leave the 20k at variable?

cruizer101

Kind of except that 20k that you pay off is coming of both the fixed and the variable.

So say you had 200,000 mortgage your minimum payments over next 4 years were 40,000 but you expected to be able to pay 60,000, i.e. overpay 20,000.
You would keep the 20,000 as variable then the remaining 180,000 would be split into variable and fixed in a ratio that would result in the variable portion being fully paid off at the end of the fixed.

I know I havn't explained it very well, I have trouble getting my head around working out the exact figures myself. You kind of need to open up two mortgage repayment calculators and play around with the numbers a bit. And even at that the variable rate will possibly change so there is still a bit of guess work and estimation involved. So in above you might say lets fix 170k for 5 years and the remaining variable is big enough that even with over-payment we won't pay it all off, but we have that option of overpaying.

manonboard

OP, if you are in a good position to repay. May i ask if you feel you have the ability to invest that money somewhere else that might make you more than the interest rates from paying back?

I really like the idea of paying off my mortgage, but over the last few years, i've made more with my money than i would have saved paying it off.. so it financially made sense, even if a little different emotionally.
It also meant the money was relatively available to me incase of emergency.

Everlong1

Are you not penalised by the bank for paying a mortgage off earlier ? You must be overpaying by fairly substantial amounts to make it worth your while ?

Shefwedfan

manonboard wrote: »

OP, if you are in a good position to repay. May i ask if you feel you have the ability to invest that money somewhere else that might make you more than the interest rates from paying back?

I really like the idea of paying off my mortgage, but over the last few years, i've made more with my money than i would have saved paying it off.. so it financially made sense, even if a little different emotionally.
It also meant the money was relatively available to me incase of emergency.

I dont see anythign else at the moment giving better interest to put into savings.....if paying off the mortgage then I get rid of the interest payment in it

Shefwedfan

Everlong1 wrote: »

Are you not penalised by the bank for paying a mortgage off earlier ? You must be overpaying by fairly substantial amounts to make it worth your while ?

Not in KBC...especially if variable. It was one of the reason I moved to them.

If you go Fixed then you can only pay off 10%

Also here for more information

https://www.independent.ie/business/personal-finance/property-mortgages/shave-tens-of-thousands-off-your-home-loan-by-overpaying-what-you-owe-36784655.html

Shefwedfan

cruizer101 wrote: »

Kind of except that 20k that you pay off is coming of both the fixed and the variable.

So say you had 200,000 mortgage your minimum payments over next 4 years were 40,000 but you expected to be able to pay 60,000, i.e. overpay 20,000.
You would keep the 20,000 as variable then the remaining 180,000 would be split into variable and fixed in a ratio that would result in the variable portion being fully paid off at the end of the fixed.

I know I havn't explained it very well, I have trouble getting my head around working out the exact figures myself. You kind of need to open up two mortgage repayment calculators and play around with the numbers a bit. And even at that the variable rate will possibly change so there is still a bit of guess work and estimation involved. So in above you might say lets fix 170k for 5 years and the remaining variable is big enough that even with over-payment we won't pay it all off, but we have that option of overpaying.

I actually understand, I would need to put all the numbers into spreadsheet but I do understand what you are getting to
Thanks

lorcand1990

Everlong1 wrote: »

Are you not penalised by the bank for paying a mortgage off earlier ? You must be overpaying by fairly substantial amounts to make it worth your while ?

As far as I know you can overpay as much as you like on a variable mortgage without penalty.
If you are on a fixed rate then you can only overpay by 10% per month, anything above that & you get a penalty

Shefwedfan

lorcand1990 wrote: »

As far as I know you can overpay as much as you like on a variable mortgage without penalty.
If you are on a fixed rate then you can only overpay by 10% per month, anything above that & you get a penalty

Be very careful, from what I can see some banks will not allow any overpayment on fixed rate

lorcand1990

Shefwedfan wrote: »

Be very careful, from what I can see some banks will not allow any overpayment on fixed rate

Thanks for the advice. I'm relatively new to the property market, currently saving for deposit. Have only been in contact with BOI so far & they confirmed that 10% over-payment on fixed rate is fine. Will make sure to ask that of any other bank too

Shaunoc

Would getting house valued as it may be favourable for LTV ratio first be sensible before switching. Values in most areas have increased. Is that still a thing especially if you have made improvements to the property? Read about it a few years ago.

jethrothe2nd

I moved from variable to a 3 year fixed with BoI and they allowed us to continue overpaying at 33% for the duration of the fixed. The only stipulation was that I could not adjust the amount , and if I cancelled it the overpayment I could not re-instate it.

SteM

manonboard wrote: »

It also meant the money was relatively available to me incase of emergency.

If you overpay with kbc you can get the money back, you just need to send them a letter and the money goes into a current account of your choosing. It takes around 10 days.

RebelButtMunch

The days of super-low interest rates seem numbered
https://www.irishtimes.com/business/economy/the-days-of-super-low-interest-rates-seem-numbered-1.3352303

Shefwedfan

Shaunoc wrote: »

Would getting house valued as it may be favourable for LTV ratio first be sensible before switching. Values in most areas have increased. Is that still a thing especially if you have made improvements to the property? Read about it a few years ago.

If you are moving mortgage or thinking about it you will need to get valuation done as part of the move. Each bank has assigned their own gangster to do the valuation. So if you are moving or thinking of moving to a particular bank I would check which company they will accept the valuation off.

Another method, get 2 estate agents in. Say you are interested in selling and see what both of them are saying you can sell for? That is free and will give you a good idea of valuation.

The valuation itself will cost 100 quid or so.

Shefwedfan

RebelButtMunch wrote: »

The days of super-low interest rates seem numbered
https://www.irishtimes.com/business/economy/the-days-of-super-low-interest-rates-seem-numbered-1.3352303

I read this article a few months ago and it has been playing on my mind, another few got released at the same time......

mayota

lorcand1990 wrote: »

Thanks for the advice. I'm relatively new to the property market, currently saving for deposit. Have only been in contact with BOI so far & they confirmed that 10% over-payment on fixed rate is fine. Will make sure to ask that of any other bank too

BOI 10% over-payment or €65/month whichever is higher.

Sarn

There should be no need to move all of your other KBC accounts when you switch mortgage provider.

mayota wrote: »

BOI 10% over-payment or €65/month whichever is higher.

Yep, we were told the same.

Wheety

KBC allow you to pay off 10% on a fixed rate. That's 10% of the balance at the time you fixed. You could fix but before fixing tell KBC you want to reduce the term by 5 years. This will increase your monthly payment, then you can work out 10% of the balance and pay extra over the fixed term to pay up to this figure.

averagejoe123

manonboard wrote: »

OP, if you are in a good position to repay. May i ask if you feel you have the ability to invest that money somewhere else that might make you more than the interest rates from paying back?

I really like the idea of paying off my mortgage, but over the last few years, i've made more with my money than i would have saved paying it off.. so it financially made sense, even if a little different emotionally.
It also meant the money was relatively available to me incase of emergency.

With interest rates on savings being so low and DIRT to be paid on what you do get you would need to be getting at a guaranteed return of 5.5%-6% for this to make sense. These returns are not available anywhere. Pay the money off your mortgage.

RebelButtMunch

Shefwedfan wrote: »

I read this article a few months ago and it has been playing on my mind, another few got released at the same time......

Yeah, as other posters have said it's a bit of a magic 8 ball thing.

If you think about the fact that I't cant really get any lower.

Then the risk... will it go higher? Of course it will but when.
Will it go higher within the next couple of years? Thats the gamble. I'm happy enough to fix now and at the very least know my repayments into the future while slightly over paying the odds. And if it goes up, I'm well placed.