Quick Mortgage Interest Rate Question

Cavan_King

My present mortgage rate is 2.75% variable and I pay 719 a month. My mortgage has 14 years left and has 97k left on it.

AIB are offering me 2.35% fixed immediately on a 3 or 5 year fixed term. Or I can get 2.25% if I pay 250 euro for a BER cert and get a 5 year fixed term.

I'm just wondering how big a difference the 0.10 will make financially? Would it even be worth the 250 euro for the cert over the next 5 years?

Paul_Mc1988

Cavan_King wrote: »

My present mortgage rate is 2.75% variable and I pay 719 a month. My mortgage has 14 years left and has 97k left on it.

AIB are offering me 2.35% fixed immediately on a 3 or 5 year fixed term. Or I can get 2.25% if I pay 250 euro for a BER cert and get a 5 year fixed term.

I'm just wondering how big a difference the 0.10 will make financially? Would it even be worth the 250 euro for the cert over the next 5 years?

Its 5 euro a month so 300 over 5 year. Also the property BER has to be a certain rating so if you dont meet it you dont get the rate. Probably best just getting the 2.35 and save the hassle for 50 quid

Q&A

The interest savings over 5 years would be just under €420 so if you're confident your house will reach the BER threshold without any additional expense apart from the assessment go for it.

However the AIB green mortgage requires a B3 or above. If yours is a relatively new house (last decade you could be ok). However any older and the work required would likely be substantially. To give you a rough idea of what to expect in terms of ratings have a look at table 2 in the following:

https://www.cso.ie/en/releasesandpublications/er/dber/domesticbuildingenergyratingsquarter42020/

If you don't have an in date BER I'm guessing (feel free to correct me) it's because you've been in the house for more than 10 years and taking that as the minimum age of your house you're borderline at best in terms of energy efficiency. The cost of improving the BER will likely be measured in thousands rather than hundreds so it might be easier to go with the higher rate if you're looking for a quick win in terms of reduced mortgage expense.

garrettod

Why not look at a cheaper rate, from one of AIBs competitors, and save more money ?

I think that Avantcard are leasing the race, with rates of 1.95% iirc.

Q&A

garrettod wrote: »

Why not look at a cheaper rate, from one of AIBs competitors, and save more money ?

I think that Avantcard are leasing the race, with rates of 1.95% iirc.

An excellent point, however, Avantmoney don't offer mortgages outside of the main cities - another assumption on my behalf but I don't know too many kings that live in exile ;-)

With such a short term and balance remaining there is an argument to focus less on mortgage rate and maximise the cashback. However, the numbers are tight. For example switching to KBC and fixing at 2.4% would cost about the same over 5 years when cashback and switching costs are controlled for.

Another issue that might impact switching is the relatively low balance. Some banks stipulate a minimum loan amount for mortgages. I've €100k in my head but this will differ my bank.

Cavan_King

Q&A wrote: »

The interest savings over 5 years would be just under €420 so if you're confident your house will reach the BER threshold without any additional expense apart from the assessment go for it.

However the AIB green mortgage requires a B3 or above. If yours is a relatively new house (last decade you could be ok). However any older and the work required would likely be substantially. To give you a rough idea of what to expect in terms of ratings have a look at table 2 in the following:

https://www.cso.ie/en/releasesandpublications/er/dber/domesticbuildingenergyratingsquarter42020/

If you don't have an in date BER I'm guessing (feel free to correct me) it's because you've been in the house for more than 10 years and taking that as the minimum age of your house you're borderline at best in terms of energy efficiency. The cost of improving the BER will likely be measured in thousands rather than hundreds so it might be easier to go with the higher rate if you're looking for a quick win in terms of reduced mortgage expense.

My house is nine years old so would make the B3 rating but I opted for the 2.35% rate as the €5 month saving will be eaten up by the cost of the BER.

I am also planning to increase my monthly mortgage payment and clear the funds owed within 5 years.

Cavan_King

Quick last query. If I owe 96,449 and loan expiry date is 03/07/34, interest rate now 2.35%, is there a calculator where I can work out what I need to increase my repayment amount to, to clear the mortgage in 5 years or 60 months?

Marty Bird

Cavan_King wrote: »

Quick last query. If I owe 96,449 and loan expiry date is 03/07/34, interest rate now 2.35%, is there a calculator where I can work out what I need to increase my repayment amount to, to clear the mortgage in 5 years or 60 months?

https://www.ccpc.ie/consumers/money-tools/extra-mortgage-payments-calculator/

adam88

Cavan_King wrote: »

Quick last query. If I owe 96,449 and loan expiry date is 03/07/34, interest rate now 2.35%, is there a calculator where I can work out what I need to increase my repayment amount to, to clear the mortgage in 5 years or 60 months?

Make sure you have every other sort of finance paid off before you even consider paying off your mortgage. Cheapest money around atm

Buddy Bubs

I have 2.95 variable with AIB and I got a BER assessment done yesterday to get the 2.25 green mortgage 5 years fixed. Fairly confident the house will keep its B rating, it just expired so I had to get a new one.
170000 left on mortgage, at 2.95 this means I would pay 5,015 interest a year. At 2.25 this drops to 3,825 so a saving of 1190 or just about 100 a month.
BER assessment cost 180 so it will pay for itself in 2 months.
6 grand saving over the 5 years, so well worth it.
Have a look around after that and see what's on offer.

Q&A

Buddy Bubs wrote: »

I have 2.95 variable with AIB .....BER assessment cost 180 so it will pay for itself in 2 months.

I'd argue your payback assesment is overly optimistic. Comparing 2.95% to 2.35% overstates the worth of the BER. As in the OPs case you could have gotten 2.35% without a BER. The question should be is the 0.1% worth the €180.

In saying all that it's still worth your while getting it but payback is more like 35 months.

Cavan_King

adam88 wrote: »

Make sure you have every other sort of finance paid off before you even consider paying off your mortgage. Cheapest money around atm

I do have every other loan boxed off except mortgage. That said, here is one question I have - is there any benefit to paying lump sums off my mortgage or increasing my weekly repayment? Rather than just saving the money myself and clearing mortgage when I have it all saved?

I’ve worked out that if I increase my repayment to 1600 from 700 a month I can clear the mortgage in five years.

But, would it have the same effect, if I just put the extra 900 into a savings account each month myself? Then when the 5 year fixed rate ends, I just use it myself to clear the mortgage. 900 x 60 = 54,000 in the 60 months.

Rather than paying the bank an extra 900 each month that is definitely gone from my funding. At least if I ever needed this 54k for an emergency, I would have access to it.

Paul_Mc1988

Cavan_King wrote: »

I do have every other loan boxed off except mortgage. That said, here is one question I have - is there any benefit to paying lump sums off my mortgage or increasing my weekly repayment? Rather than just saving the money myself and clearing mortgage when I have it all saved?

I’ve worked out that if I increase my repayment to 1600 from 700 a month I can clear the mortgage in five years.

But, would it have the same effect, if I just put the extra 900 into a savings account each month myself? Then when the 5 year fixed rate ends, I just use it myself to clear the mortgage. 900 x 60 = 54,000 in the 60 months.

Rather than paying the bank an extra 900 each month that is definitely gone from my funding. At least if I ever needed this 54k for an emergency, I would have access to it.

The interest your paying on the morgage is higher than the interest you get on your savings so its better to overpay

Buddy Bubs

Q&A wrote: »

I'd argue your payback assesment is overly optimistic. Comparing 2.95% to 2.35% overstates the worth of the BER. As in the OPs case you could have gotten 2.35% without a BER. The question should be is the 0.1% worth the €180.

In saying all that it's still worth your while getting it but payback is more like 35 months.

True, I didn't even realize I could get so close without the BER.

Cavan_King

Paul_Mc1988 wrote: »

The interest your paying on the morgage is higher than the interest you get on your savings so its better to overpay

But would the difference not be quite minimal? AIB are also stating they would charge breakage fees for overpayments as I’m now on a fixed mortgage.

Gerard93

Cavan_King wrote: »

But would the difference not be quite minimal? AIB are also stating they would charge breakage fees for overpayments as I’m now on a fixed mortgage.

Do they require a valuation as well ?

bilbot79

adam88 wrote: »

Make sure you have every other sort of finance paid off before you even consider paying off your mortgage. Cheapest money around atm

And make sure pension AVCs maxed out!

Cavan_King

Gerard93 wrote: »

Do they require a valuation as well ?

Nope. They've never asked about a valuation.