Best buy mortgage for a First Time Buyer

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Brendan Burgess

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This is an old thread which has now been replaced by this one:

Key Post - First Time Buyer mortgage guide

Some tips and Frequently Asked Questions when applying for a mortgage as a first-time buyer (FTB)... Start by getting mortgage approval from the lender you bank with If you have your current account with Bank of Ireland, then apply directly to them for a mortgage. Assuming you have a good...
www.askaboutmoney.com


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.

I try to keep this up to date but sometimes it falls behind. Do verify the rates yourself.

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 2.45%
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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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.
 
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
 
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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Brendan Burgess said:
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.
Click to expand...

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.
 
Hi Coyote

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

Extortionate Change in Break Fee

We were originally told our break fee with KBC was €0 so we pressed ahead with a new mortgage application (which just so happened to still be with KBC) so that we could move house. When the conveyancing process was finalised and we finally moved into our new home, we were told by KBC that our...
askaboutmoney.com

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
 
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!!
 
With AIB lowering their rates, does this have any impact on the above advice?
 
I have a KBC current account so get a further discount I understand. The Cashback with UB is enticing though
 
KBC are giving €1,500 back on fees until 31st December 2020 for first time buyers who fix for 3, 5 or 10 years:

KBC Ireland

KBC Ireland
www.kbc.ie
 
KBC are not offering exceptions to central bank lending rules due to Covid
 
Ryan said:
KBC are not offering exceptions to central bank lending rules due to Covid
Click to expand...

I'd have thought most banks have exhausted their allowance on exemptions at this stage. Perhaps due to COVID they used theirs up earlier than expected.
 
Sorry guys, I'm new to all this. Am I missing something?

Is the BOI offer not the best around when you take into account the 2% cashback?

Example, a 300k mortgage.
Repayments on BOI would be €1249 per month @ 2.9%
Repayments on UB would be €1154 per month @ 2.3%

At the end of the 2 year fixed period, you would have paid €29,976 (BOI) vs €27,696 (UB). However, the cashback offer with UB is €1,500 towards legal fees and with BOI would be 2%, or €6,000. Leaving BOI much better off.

Even if I add in the fact that there is extra money on your mortgage with BOI after 2 years because of the higher rate (by my calculations using a standard mortgage amortisation spreadsheet this is €1,376?) it still makes the BOI offer seem much more appealing.

I probably have missed something here, could someone help me understand where I've gone wrong in my maths? As I say, new to this whole thing.
 
For a mortgage you have to look at mor and than just the two years unless you are willing and able to switch on a regular basis.

Whilst past rates do not necessarily dictate future rates, BoI have in the last few years been one of the more expensive players in the market, so unless you are willing to switch after two years, their cash back offer starts becoming less attractive.

But I think you are looking at it correctly, but look at a longer term than just the 2 years of fixed
 


I'm in a almost identical situation as yourself and was arriving at the same conclusion. I was going to opt for the 2% cashback with EBS @ 2.9% and then switch after 2 years ( hopefully do multiple switches as recommended on this forum and pick up some more cashback while reducing my rate) . This would assume of course these offers are still around in two years time.

Did you decide which to go for yourself?
 
Do Avant have a min mortgage amount?

Its not clear from their website or maybe I just can't see it amidst all the waffle.
 
I didn't see any mention of a minimum. But you have to go through a broker so Avant don't really give much detail.

I've been told by a broker that Avant would approve in principle a €250k mortgage for me, if that helps by any chance.
 
Only saw this response now but we ended up with AIP from Ulster Bank, it's a new build so we haven't drawn down so that's going to be interesting!

We also got (full, not their instant one) AIP from AIB as a back up, thought I may be back to the drawing board now.
 
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