Breaking Out Of Fixed Rate

Hey guys,
Basically if I want to break out of my 5 year fixed with First Active they will let me do this by paying them €8,224.01 and I will then move to what they call a "flexible variable rate of 3.75%". My current rate is 6.24% and that
is fixed until 21/08/2013, basically I am nearly 1 year into my first
year of the fixed at the moment.

My current re-payment after the new TRS rates introduced by the
Government recently is €1,293 with the amount before TRS is €1502.05. The
new re-payment after TRS would be €870 and before TRS would be €1,070.
Thus taking 870 form 1,293 it looks like I would be saving approximately €423 per month by switching to the new rate that is of course assuming the rates do not go up!!

Any advice from you guys on what I should do? Anyone else in a similar situation?

Cheers,
M

It will take you 19 months to just get back in savings what you will spend to break the fixed rate. It is anyones guess on where rates will be in 19 months time, they will "probably" be higher than where they are now but that is just my guess.

Do you have other options to re-mortgage with a different provider? Can you get a better rate that 3.75%?

To re-mortgage though you'd have to break (or at least that is my understanding!)... The advantage of breaking would be that you would have the flexibility to move if you wanted to later, and the flexibility to search out a new lower fixed rate if you wanted to do that either. It is expensive to do so but if you can afford it, I'd personally be inclined to do it since it would give me back control.

Thanx guys. Your right so-crates, I will still have to pay the break out fee even if I re-finance, I have looked into this. That was the first thing I thought about doing to get around having to pay the lump sum.

Right now I can afford the 6.24% but it leaves me like €850 a month to live on. That extra €423 per month would take the pressure off a bit and once I got someone in to rent my extra room I would have an extra €400 - €500 from that.

Cheers,
M

madmoe said:

That extra €423 per month would take the pressure off a bit and once I got someone in to rent my extra room I would have an extra €400 - €500 from that.

M

Click to expand...

But presumably you already have that 423 per month in your pocket (for the next 19 months anyways) because you would have to pay the 8k to break the fee?

Yes indeed. I had not wanted to use my savings for this. Its 6 of one and half a dozen of another.....feck it!!

M

It is always a good idea to have some savings in case of loosing your job etc etc. If the 8k would leave you with a small amount of savings I would consider sticking to the fixed rate.

Hard decision.

I have, well what I think is a pretty secure government job (not boasting or anything) but you never know these days.....

I think I would actually pay the 8k and go onto the variable, although I would look around as I think you will get better than 3.75.

Amount left to pay on mortgage is approximately €263 and same apartments on Daft.ie are selling for max €310 and I doubt I would even get that. Thus, I think I'm gonna find it pretty hard to get anyone to re-finance with at the mo due to the poor loan to value ratio??

at 310k your ltv is 85%
aib would consider up to 92% ltv. aib's main concern is repayment capacity and sustainability of income/employment, which in your case sounds to be good.
aib ltv variable rate is 2.65% and they have some good fixed rates too, eg 3 year 3.19%.
budget approx €1500 legal fees to switch but it wouldnt take too long to make that back. over 1% difference in the rate, equivalent to €240 p/m of a saving!

Thanx Alchemi,
Should I call them or pop into a branch as the next step? The thing is though I would still have to pay the break fee as well as additional €1500 but with a 1% difference I guess I would be saving in the long run?

M