Cashback vs. Low Rate: First- Time Buyer

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locogabo2

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I'm in the position of having to decide vs 3 mortgage options for a first-time buyer at a 5 yr fixed rate.

I'm getting the following offers, for >90% LTV:

PTSB: 2.85% with a 2% cashback, and 2% monthly discounts on payments. Follow-up rate: 3.9%. Option to make lump sump payments is a grey area.
Avant: 2.5% with no cashback. Follow-up Rate 2.75%. Option to make up to 10% overpayments in a year with no fee.
AIB Green Rate: 2.25%, no cashback, 3.15% follow-up rate No possibility of making lump sump payments without a fee.

I'm the process of analysing which option might be the best. I plan on selling the property at some point, so I don't think the 30 yrs will be fulfilled.

Should we be analyzing the options as if we won't change mortgages? What would you advise our apprioach be? The cashback is attractive, however, the rate in PTSB is much higher, which makes me weary about it, as for 5 years, you would be paying more interest.

Thanks for your suggestions, insights, and ideas!
 
For useful feedback, it would help if you can provide more detail such as:
  • Property value
  • Mortgage amount
  • Age/income/LTI
 
Forget about ptsb. You will be stuck paying a higher rate after the fixed rate is up.

locogabo2 said:
Avant: 2.5% with no cashback. Follow-up Rate 2.75%. Option to make up to 10% overpayments in a year with no fee.
AIB Green Rate: 2.25%, no cashback, 3.15% follow-up rate
Click to expand...

What term is the fixed rate for?

The follow-on rate is not important.

When your fixed rate is up, then you will be able to fix again.

I would go for the AIB Green Rate. They have a peculiar way of calculating early repayment fees, so it's likely that any such fee will be small.

Brendan
 
_OkGo_ said:
For useful feedback, it would help if you can provide more detail such as:
  • Property value
  • Mortgage amount
  • Age/income/LTI
Click to expand...


I would add capacity to repay.

It's a case of comparing cashback versus interest cost. The latter will depend on the rate but also how fast you'll be able to repay.

In the extreme case (call it a cash buyer) cashback wins. However for the rest of us mere mortals the benefits of cashback will be eroded over time as money up front is associated with higher rates.
 
Last edited:
_OkGo_ said:
For useful feedback, it would help if you can provide more detail such as:
  • Property value
  • Mortgage amount
  • Age/income/LTI
Click to expand...
Sorry for not being thorough.

The property value is around 323,000, and the mortgage amount is 90% of the value.
Early 30s.
 
Brendan Burgess said:
Forget about ptsb. You will be stuck paying a higher rate after the fixed rate is up.



What term is the fixed rate for?

The follow-on rate is not important.

When your fixed rate is up, then you will be able to fix again.

I would go for the AIB Green Rate. They have a peculiar way of calculating early repayment fees, so it's likely that any such fee will be small.

Brendan
Click to expand...
Avant offer a 4 year fixed term rate of 2.35%, and a 5 year fixed rate of 2.50%.
The win I see of Avant vs. AIB is that Avant makes you make 10% repayments per year without any fee.

I was thinking the same about PTSB. I would rather lock a cheaper rate than receive cashback. I would plan on using the 10% repayment option a year, which is why I would lean towards Avant, but the AIB Green Rate is also a strong contender.
 
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