Mortgage : Fixed vs Variable

masterboy123

We have mortgage approval for a year to a max value we can afford. However we would be taking out 2/3rd of max value. The bank didn't highlight the APR rate or if its fixed or variable. They told us to come back when we have found a property.

We are hoping to get variable mortgage, in that case:

1. is it possible to pay lumpsumps of few grands every now and then, to reduce the total interest rate? At present total interest rate is in the region is 65,000e. We were hoping if we pay 10,000 at after 5 years, would it bring down 65,000e?

2. And also if mortgage is for 25 years, can we finish off in 20 years without any excessive penalty?

Overall, I have read people prefer variable rate over fixed rate currently, correct me if I am wrong.

VW 1

masterboy123 wrote: »

We have mortgage approval for a year to a max value we can afford. However we would be taking out 2/3rd of max value. The bank didn't highlight the APR rate or if its fixed or variable. They told us to come back when we have found a property.

We are hoping to get variable mortgage, in that case:

1. is it possible to pay lumpsumps of few grands every now and then, to reduce the total interest rate? At present total interest rate is in the region is 65,000e. We were hoping if we pay 10,000 at after 5 years, would it bring down 65,000e?

2. And also if mortgage is for 25 years, can we finish off in 20 years without any excessive penalty?

Overall, I have read people prefer variable rate over fixed rate currently, correct me if I am wrong.

If you're in a position where you know you will be overpaying regularly ie. monthly or annually, go for the variable. It'll be a slightly higher rate compared to a fix.

If you're going to go with paying off once every three or five years, you'll get a lower rate and obviously fixed payments without being affected by interest rates for the period you've fixed for. At that point you can pay your lump sum off when you transition from the fixed to the variable.

If you aren't on a fixed rate after 20 years, you can pay the balance without penalty.

Just to make sure you are aware, you can fix for a period, go variable for a period, back to fix etc. Nothing is set in stone apart from the length of the period you may choose to fix for.

masterboy123

Thank you so much.

Another tricky Q if anyone has the answer please. Given HTB covers 5%, for mortgage upto 70%, say I pay extra 10% lump sum after 2 years, will I be breaching HTB scheme?

VW 1 wrote: »

If you're in a position where you know you will be overpaying regularly ie. monthly or annually, go for the variable. It'll be a slightly higher rate compared to a fix.

If you're going to go with paying off once every three or five years, you'll get a lower rate and obviously fixed payments without being affected by interest rates for the period you've fixed for. At that point you can pay your lump sum off when you transition from the fixed to the variable.

If you aren't on a fixed rate after 20 years, you can pay the balance without penalty.

Just to make sure you are aware, you can fix for a period, go variable for a period, back to fix etc. Nothing is set in stone apart from the length of the period you may choose to fix for.

VW 1

masterboy123 wrote: »

Thank you so much.

Another tricky Q if anyone has the answer please. Given HTB covers 5%, for mortgage upto 70%, say I pay extra 10% lump sum after 2 years, will I be breaching HTB scheme?

Tbh, I've no idea of the ins and outs of the HTB scheme, perhaps someone else will be able to help on that.

GingerLily

Your LTV will fall below 70% regardless of you paying a lump sum if your original LTV is 70%, so revenue won't mind you paying back early.

You do have to live there for 5 years though nor they'll look to claw back a proportion of the tax relief. There's a pdf on their site with more information.

The help to buy to thread might be more useful for you if you have various questions about the scheme.

masterboy123

Thank you so much, I am going to look at the thread and also the pdf on revenue website.

Cheers

GingerLily wrote: »

Your LTV will fall below 70% regardless of you paying a lump sum if your original LTV is 70%, so revenue won't mind you paying back early.

You do have to live there for 5 years though nor they'll look to claw back a proportion of the tax relief. There's a pdf on their site with more information.

The help to buy to thread might be more useful for you if you have various questions about the scheme.

Q&A

masterboy123 wrote: »

We have mortgage approval for a year to a max value we can afford. However we would be taking out 2/3rd of max value. The bank didn't highlight the APR rate or if its fixed or variable. They told us to come back when we have found a property.

We are hoping to get variable mortgage, in that case:

1. is it possible to pay lumpsumps of few grands every now and then, to reduce the total interest rate? At present total interest rate is in the region is 65,000e. We were hoping if we pay 10,000 at after 5 years, would it bring down 65,000e?

2. And also if mortgage is for 25 years, can we finish off in 20 years without any excessive penalty?

Overall, I have read people prefer variable rate over fixed rate currently, correct me if I am wrong.

What bank are you going with? Most banks allow some form of overpayment before a break fee is incurred. There are also EU rules governing how break fees are calculated. In very simple terms of you fix now and interest rates go up you should not incur a break fee. In this situation you can pay back a bit or all of what is fixed.

There is a difference between mortgage duration and fixed rate period. The longest fixed rate on offer from commercial mortgage provider is 10 years.

Bazpd

I know some people who split there mortgage say 70% Fixed and 30% Variable so that they can overpay without been penalised. Don't have a mortgage myself so not too sure but something you could run by them.

Will essentially mean that you'll end up with two mortgage accounts, one for fixed and the other variable.

masterboy123

I am with AIB.

What's the break fee like? Say it's 20 years mortgage, but I pay off everything by 15 years. In this case, will I be able to get house documents, etc. at end of 15 years?

Q&A wrote: »

What bank are you going with? Most banks allow some form of overpayment before a break fee is incurred. There are also EU rules governing how break fees are calculated. In very simple terms of you fix now and interest rates go up you should not incur a break fee. In this situation you can pay back a bit or all of what is fixed.

There is a difference between mortgage duration and fixed rate period. The longest fixed rate on offer from commercial mortgage provider is 10 years.

Grumpypants

You won't fix for the full term of the mortgage, just a few years. I've fixed for 4 years at 2.6% the saving was €140 a month plus it's some stability, then after that i get to choose to fix again or go variable or move bank.

Generally they will let you pay a lump sum once a year. But if not, just save it and pay it off after the fixed period.

To be honest very few banks will refuse your money.

Widdensushi

The banks cannot lose, I would be in favour of fixing if you could fix for the term, they only allow you to fix for as far as they can make a good calculation of the likely rates. The last time I asked boi for a loan they were only interested in giving me a fixed rate. That's a few years ago and obviously they saw that as their maximum profit going forward.

masterboy123

How come you paid less for getting a Fixed term mortgage and managed to save 140 a month?
Usually a Fixed interest rate is higher, than variable rate.

AIB : Fixed is 3.20; Variable 2.95 at present.

Grumpypants wrote: »

You won't fix for the full term of the mortgage, just a few years. I've fixed for 4 years at 2.6% the saving was €140 a month plus it's some stability, then after that i get to choose to fix again or go variable or move bank.

Generally they will let you pay a lump sum once a year. But if not, just save it and pay it off after the fixed period.

To be honest very few banks will refuse your money.

Q&A

masterboy123 wrote: »

I am with AIB.

What's the break fee like? Say it's 20 years mortgage, but I pay off everything by 15 years. In this case, will I be able to get house documents, etc. at end of 15 years?

Break fee depends on the rates on offer to the bank on the day you fix and the day you break. So really only the bank can tell you what that is.

zl1whqvjs75cdy

masterboy123 wrote: »

How come you paid less for getting a Fixed term mortgage and managed to save 140 a month?
Usually a Fixed interest rate is higher, than variable rate.

AIB : Fixed is 3.20; Variable 2.95 at present.

My variable was 3.15 and new fixed is 2.65. Switched bank though.

tommythecat

donkeyoaty0099 wrote: »

My variable was 3.15 and new fixed is 2.65. Switched bank though.

And Ulster bank have a 2.3 fixed rate for three years.

Grumpypants

masterboy123 wrote: »

How come you paid less for getting a Fixed term mortgage and managed to save 140 a month?
Usually a Fixed interest rate is higher, than variable rate.

AIB : Fixed is 3.20; Variable 2.95 at present.

Ulster bank have a 2.6% fixed for 4 years rate. I was on 3.9 i think. Payments went from 1090 to 950. Think KBC have a 2.5% fixed rate too.

masterboy123

Kbc got fixed rate for 1 year only. I think afterwards their rate may go high.

Grumpypants wrote: »

Ulster bank have a 2.6% fixed for 4 years rate. I was on 3.9 i think. Payments went from 1090 to 950. Think KBC have a 2.5% fixed rate too.

zl1whqvjs75cdy

masterboy123 wrote: »

Kbc got fixed rate for 1 year only. I think afterwards their rate may go high.

I fixed for 5 years with kbc at 2.65 %

masterboy123

That's really good!

Is it negotiable to come to a different rate than what is advertised on the banks website? Because AIB fixed rate is 3.20% now.

If I ask AiB for 2.70% fixed rate, would I look stupid to ask this? Never took a loan before so I am not familiar with the tactics.

donkeyoaty0099 wrote: »

I fixed for 5 years with kbc at 2.65 %

Grumpypants

No harm asking if they will match the other offers.

When i was getting my mortgage (just as the new rules came in) AIB swore blind they couldn't give me a 90% mortgage. I rang them and said fine, Ulster have offered me the 90% so i won't need their business. 20 mins later I got a call back saying they had the 90% mortgage for me.

But don't forget that if you chose a variable you can change it later. If you just want to get it in place and get the house bought you can always fix in a few months.

We fixed at 3.9 for 3 years at the start, we fixed again at the end of those 3 years for the new 2.6% rate.

masterboy123

Thanks, that's a good info!