Advice on best Mortgage rate BOI

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mackmook

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Can someone advise me on the best value rate from the below options please?
This is based on an assumed mortgage of €364,500 over 34 years purchasing an A rated house.

1. 3 or 5 years fixed rate of 3.90% - Monthly repayments - €1,614, will receive cash back of 2% of the mortgage (€7,290) when you move into the new property & and an additional (€3,645) after 5 years

2. 4 year fixed at 3.10% - Monthly repayment would be €1,446

3. 5 year fixed at 3.40% - Monthly repayment would be €1,508

4. 7 year fixed at 3.45% Monthly repayment would be €1,518

Any help would be greatly appreciated
 
Four years fixed at 3.1% plus another year (assuming here) at the same rate = 60 * 1446 = 86,760



Three/five year fixed at 3.9%

Cost over five years = 60 * 1,614 = 96,840 less cashback = 85,905

This assumes that the cashback is saved against the mortgage.




I am usually sceptical of cash-backs, and I initially leaned towards the 3.1%.
 
The first thing you need to do is ignore the monthly payments. It is not the true cost of the mortgage as the payment is both capital and interest.

You only need to focus on the interest rate. Cashback slightly complicates but if you assume that you'll stay in the fixed term, then the easiest way is to average it out.

Starting with the 5 year terms you have:
- 3.4% over 5 years (no cash back)
- 3.5% over 5 years (cashback, 3.9 - (2.0/5))

Already it is clear that cashback is more expensive for the 5 year term.

Where it gets a bit more convulted is when you try to compare varying fixed term lengths to each other as you have to make some assumptions as to the follow on fixed or variable rates.

If you take cash back for 1 year fixed, you will have an effective interest rate of 1.9% for year 1. If you assume that at the end of year 1 you can still get a fixed rate of 3.1%(4yr), then overall your average for the first 5 years is <2.9%.

However BOI are not known for treating existing customers fairly, the rates you've quoted abov could be for new customers only.

On the whole, if you want certainty for a few years and are not prepared to switch providers regularly, then going with the 4 year at 3.1% is a balance of being close to the lowest cost and with 4 years of certainty

But I can't stress enough that you shouldn't compare the monthly payments, only focus on the interest rate.
 
mackmook said:
1. 3 or 5 years fixed rate of 3.90% - Monthly repayments - €1,614, will receive cash back of 2% of the mortgage (€7,290) when you move into the new property & and an additional (€3,645) after 5 years
Click to expand...

It's not really a saving. You're just going to spend it on the house - if you didn't have it you wouldn't have spent it.

In July 2030 on 3.1% you'd owe €331,192.43
In July 2030 on 3.9% you'd owe €335,571.77

So, on the higher rate you'd have paid an extra €62 per month = €3720 plus you'd owe an additional €4379.34

So, in July 2030 you're €8,099.34 worse off. You can't make lump sum payments on BOI fixed rates so the cashback has probably been spent on the house.

Up to you...
 
For the fixed period yes, but you need to look at the total cost over the full term of the mortgage and you'll likely save over the long term with a tracker style loan that Avant offer. At the very least you should crunch the numbers for the different BOI options and also the Avant one - over the full term of the loan - to arrive at a reasonable comparison. Obviously some assumptions will need to be made about likely rates going forward after any fixed period.
 
I do not understand that ClubMan. Can you say more, as I may have it wrong. Why should we look at the full term of the loan, if we are people who are prepared to switch?

I am in the same boat. With Haven, who will put me onto some horrible variable rate in August.

AIB is 3%, 3 years, 3k cashback. The cashback puts them ahead of Avant and the rates would need to go down considerably before Avant nets out better. I did the maths and even assumed some further cuts playing out over the next 12 months to bring the Avant cost over the 3 years down further.
 
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