Key Post Best buy mortgage for a First Time Buyer

Brendan Burgess

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This is the first draft of this post. I welcome comments - especially from First Time Buyers. Do you find it helpful? Do you disagree with the conclusions? Am I leaving out some other factors? Brendan

There is a bewildering array of products so I am going to pick a couple of products which I recommend based on rate and a number of other factors.

It is usually better to choose a variable rate mortgage, but the Irish mortgage market is dysfunctional, and fixed rates are cheaper than variable rates.

Furthermore, there does not seem to be much of an advantage in having a low Loan to Value ratio.

Always apply to a few lenders for approval.

Ulster Bank 2 year fixed rate maximum Loan to Value 90% : 2.3%

Note: Maximum 3.5 times Loan to Income - i.e. not available to borrowers who want an exception to the Central Bank rules

I recommend this because
  • It's one of the lowest rates
  • When the fixed rate ends, it's very likely that Ulster Bank will still be competitive. They do not exploit existing customers to the same extent as many other lenders.
  • They allow the mortgage holder to make extra repayments of 10% of the capital each year without penalty.
  • They pay €1,500 towards your costs - which reduces the rate to around 2.2% depending on the size of the mortgage.
The only downside is that Ulster Bank's admin can be very slow and cumbersome. It seems to take them longer to process the actual mortgage. When it's up and running, this should not be a problem. But I would avoid an Ulster Bank current account.

Others worth considering

KBC 2 year fixed 2.3% maximum LTV 90% (or 2.25% if your LTV is <60%)


If you need an exception to the Central Bank Loan to Income rules, then this would be better.

Otherwise, slightly inferior to Ulster Bank because
  • You must open a current account with KBC
  • There is no €1,500 towards your costs

Bank of Ireland

Fixed for one year or two years: 2.9% (2.3% net after factoring in cash back)
Fixed for three or five years: 3% (2.4% net after factoring in cash back)

You also get 2% cash back immediately and a further 1% cash back if you are still a customer after 5 years.

Calculation of net rate: 3% cash back is the equivalent of about 0.6% a year less interest over 5 years.

AIB Green mortgage 5 years fixed at 2.5%
If you have a BER of between AI and B3, this is worth considering.
AIB has the lowest variable rate mortgage and passes on rate cuts to customers automatically.
 
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Brendan Burgess

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You should avoid permanent tsb

While none of the lenders treat their customers well, ptsb has a long record of abysmal treatment of customers.

This continues to this day. It is the only lender which does not allow its existing customers avail of the rates on offer to new customers.

You should only take out a ptsb mortgage if you are refused by all the other lenders.

You should avoid long-term fixed rates

Many first time buyers trade up again within a few years. If you are stuck in a 10 year fixed rate mortgage, there might be a big early repayment fee to pay.
 

Brendan Burgess

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If you want to be really clever...

Some borrowers exploit the cash-back deals on offer by some of the banks.

The get loan approval from EBS, ptsb and Bank of Ireland simultaneously. The loan approval lasts for about 6 months.

Immediately after they draw down their EBS mortgage and get their 2% cash back, they switch to ptsb.

When that is drawn down, they switch to Bank of Ireland.

Further details here

 

Brendan Burgess

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38,644
With all fixed rate mortgages, you must be alert to your options when the fixed term ends.

They default to very high variable rates.

You will get a letter telling you the options. Don't put it on the long finger.

Either fix again or switch lender.

Brendan
 
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NoRegretsCoyote

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You should avoid long-term fixed rates

Many first time buyers trade up again within a few years. If you are stuck in a 10 year fixed rate mortgage, there might be a big early repayment fee to pay.
I don't think this is good generic advice.

Long-term fixed rates are as low as they've ever been. If you plan to stay put and you want to insure against rising rates then a fixed rate might suit you.

People forget that for break fees you (generally) won't have to pay if interest rates rise. Personally I don't think that Irish mortgage rates have much further to fall as there is a floor at which banks won't go lower and we are close to it. Over a longer term - say ten years- there is more space for them to rise than fall.
 

Brendan Burgess

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Hi Coyote

This guy got hit for a €17k break fee on a €140k mortgage because he had fixed for 10 years.


As Irish fixed rates are significantly above eurozone fixed rates, I think that there is scope for them to fall.

Maybe for the purposes of this Best Buy thread, I will stick to my recommendation but acknowledge that opinions differ and link to a longer discussion elsewhere.

Brendan
 

luckystar

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160
Sister (a FTB) called me earlier - UB offering 2.9% fixed for 7 years. Not sure if based on LTV or not

Rates are such a minefield - even for someone who understands are the terminology!!
 

Sarenco

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You should avoid permanent tsb
Hi Brendan

I think the PTSB variable rate (with the 2% cashback on drawdown, 2% cashback on each monthly repayment and a discount of 0.5% on the LTV based variable rate in year one) would be very attractive to a borrower that is expecting to receive a large lump sum in the relatively near future (eg personal injury settlement, inheritance, business sale, bonus payment, etc.).
 

Brendan Burgess

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Thanks Sarenco

I think that is too narrow a cohort to try to accommodate. I want to give a simple guide to the majority of cases and not list out every possible option.

And in one sense that is already covered by the link to the thread about getting cash back multiple times.

Brendan
 

HollowKnight

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168
With all fixed rate mortgages, you must be alert to your options when the fixed term ends.

They default to very high variable rates.

So you should either fix again or switch lender.

Brendan
All lenders are now obliged to send on letter with products (from their current provider) that the customer can switch to (at the end of their fixed term). It just requires to tick a box and return the letter. There really should be no excuse for defaulting back to the high SVR.
 

Brendan Burgess

Founder
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38,644
Thank you Sir

I have updated the post as follows:

With all fixed rate mortgages, you must be alert to your options when the fixed term ends.

They default to very high variable rates.

You will get a letter telling you the options. Don't put it on the long finger.

Either fix again or switch lender.

Brendan
 
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