Best Buy Finance Ireland will reduce your fixed rate if your LTV falls

Brendan Burgess

Brendan Burgess

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(Copied from the Best Buys thread)

If you expect to reduce your LTV, Finance Ireland will reduce your rate

If you are borrowing 90% for 10 years , First Ireland is 2.85% vs. 2.65% for Avant.

However, if your LTV falls either because you pay off capital, or due to house price inflation, First Ireland will give you the lower rate. It could fall to 2.4% if the LTV falls below 60%.

So you could end up with a cheaper loan from Finance Ireland.

I would probably opt for what is cheaper now, unless I had definite plans to reduce the mortgage quickly.

Brendan
 
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Is this it? It's a bit hidden

https://www.financeireland.ie/products/residential-mortgages/long-term-fixed-rates/
 
Thanks Red. That is it. I have made a PDF of it, and printed it out.

I wonder how it works in practice?

A fixed rate that can reduce over time

Our fixed rates vary depending on your loan to value percentage (%) when you take out your mortgage. This is also known as LTV. LTV is the amount you are borrowing as a percentage of the value of property. For example, if the property is worth €100,000 and you are borrowing €90,000, your LTV is 90%.

As you make repayments over time and your loan to value percentage goes down, we’ll move your rate down to match. You’ll have the peace of mind of knowing that your long-term fixed rate will only ever reduce and will never go up.

How we decide rate reductions

We will decide rate reductions by comparing your mortgage balance at each monthly repayment date to the most recent valuation we have of your property. This will be either the original valuation from when you first bought the property or any updated valuation you may have provided us with since then. As your loan to value percentage (LTV) decreases over time, we will automatically apply the relevant LTV fixed rate. Please note that our mortgage rates may change.

Let's take their current ten year rates

1638266406211.png


So I buy a property worth €200k with
a mortgage of €170k
85% LTV so the rate is 2.85%

If the mortgage rates don't change...

I pay €20k off my mortgage bringing the LTV down to 75%.
They automatically reduce the fixed rate to 2.7%

If mortgage rates go up...
Say that the new <80% rate is 3%
Then I won't benefit from the feature.

If mortgage rates go down...
Let's say that competition brings down their <80% rate to 2.5%

Then I will get a big benefit.

Brendan
 

Attachments

  • Finance Ireland - Long-Term Fixed Rates - Finance Ireland.pdf
    165.7 KB · Views: 206
This also seems like a really good product.

I’m coming to the end of a fixed rate at 2.5%.

If I wanted to, I could fix for 15 years at 2.5% with the facility to overpay up to 10% a year.

Given where we’ve come from, that’s really good.
 
I am trying to figure out for what sorts of customers, this facility suits.

1) It only applies to people who fix for 10 years or more
2) It is most appropriate the higher your LTV is at present.

Let's look at someone who wants to fix for 10 years

1638352941371.png

Clearly, if your LTV is less than 80%, there is little point in going for Finance Ireland.
You can fix for 10 years with Avant at 2.35% now anyway.
If you go with Finance Ireland, you will start at 2.7% and then if you bring down your LTV, it will still be higher than Avant's rate.

The exception to this would be if Finance Ireland reduces their rates generally.
For example, let's say that Finance Ireland reduces their 60% LTV rate to 1.5%, then you would be better off with Finance Ireland.
It would have to be a very sizable reduction for Finance Ireland to work out better.

Let's say you want to fix for 20 years

1638353195518.png

The downside of Avant is that this is a One Mortgage product, so the mortgage term must also be 20 years. You can't have a 30 year term, and fix for the first 20 years.

If you start with Finance Ireland at 90%, you will pay 2.99%.
You will have to get it below 70% to match Avant. In other words, you could have started with Avant at 2.75% for 90% LTV.

When you get it below 60% LTV, you will be better off with Finance Ireland.

Let's say you buy a €500k house with an 85% mortgage €425k. In the initial years, Finance Ireland will be €1,000 a year more expensive.

If, after 5 years, you get the mortgage down to €300k (60%) , Finance Ireland will be €450 cheaper.
However, if your mortgage drops to €400k after 5 years, and your house increases in value to €670k, then you will save €600 a year.

Brendan
 
My conclusion is that the idea of what Finance Ireland is doing is great, but as the Avant rates are much cheaper, you are better off with Avant.

Avant has a maximum early repayment charge of 2%, compared to Finance Ireland's 5% in the first 5 years.
 
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