First Timers Mortgage Q

Hi, have mortgage approval in principal with Avant, PTSB & BOI.

Put an offer in on a new build and now need to get back to the estate agent with who our mortgage is with. So, we will reach out to mortgage broker to go through the next steps and see who we should go with based on the various options and go back to estate agent with who our mortgage is with.

A couple of questions just to help my understanding, apologies in advance if they seem naieve but I would like to have a better idea before speaking to the mortgage broker.

Using a mortgage repayment calculator and comparing a 20 year v 25 year option, the overall repayment is higher by maybe 45k for 25 years v 20 years.

1. If we went with the 25 year option and overpaid throughout so that we effectively paid the mortgage off in 20 years, is the overall repayment going to be broadly similar to what it would have been if we had taken the 20 year option initially?

2. If we would like to overpay monthly, initially at least, is there anything we need to look out for in relation to T&Cs with the various mortgage offers? Penalties etc.

3. With the current economic climate & interest rates, is a fixed rate advisable for the next 3/5 years? Or is that a question for mystic meg?

4. Would we need to purchase mortgage protection? If so, any estimates of annual cost for couple in mid 30's?

Any advice is much appreciated.

JimmyCorkhill said:

1. If we went with the 25 year option and overpaid throughout so that we effectively paid the mortgage off in 20 years, is the overall repayment going to be broadly similar to what it would have been if we had taken the 20 year option initially?

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Should be, although mortgage protection life insurance premiums for the 25 year term will be higher than for 20 years but probably a minor issue/cost in the greater scheme of things.

JimmyCorkhill said:

2. If we would like to overpay monthly, initially at least, is there anything we need to look out for in relation to T&Cs with the various mortgage offers? Penalties etc.

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Almost certainly not assuming it's not a fixed rate.
You can overpay/clear a variable rate mortgage any time without penalty.
But, when overpaying, make sure to make clear your intentions to the lender so that the overpayments are deducted from the capital balance ASAP.

JimmyCorkhill said:

3. With the current economic climate & interest rates, is a fixed rate advisable for the next 3/5 years? Or is that a question for mystic meg?

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See the many other recent threads about variable/tracker versus fixed rates.
What rate have you been offered by the various lenders?

JimmyCorkhill said:

4. Would we need to purchase mortgage protection?

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Yes, the lender will require it unless there are limited extenuating health related circumstances.

JimmyCorkhill said:

If so, any estimates of annual cost for couple in mid 30's?

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Just shop around online for mortgage protection life insurance to get an idea.

Thanks for your helpful reply. It is much appreciated.

Likely to be going with a fixed rate, so it may limit the amount that can be overpaid on a monthly basis. Was trying to decide between a 20 v 25 year mortgage, if harder to do overpayment on a fixed mortage we may side with a 20 year mortgage, although presumably nothing to stop going with a 22 year mortgage per se?

Got mortgage approval in principle a few months back, the rate was around 2.5% or so for 5 year fixed but mortgage broker said at the time to ignore the interest rates on the offers. However, speaking with mortgage broker today and he is talking about looking at the 1.9% or 2.2% rates that are available with PTSB & BOI, gave me some figures etc to look at and come back to them on.

Will need to keep house for 5 years as availing of HTB scheme, house will have good BER rating so notice some green mortgage part to the mortgages. Do potentially plan to move after 5 years, not guaranteed but would be something we would consider.

BOI doing a 4 year fixed for 1.9% & a 2.2% for 5 years, would have thought the 4 years may make more sense even if required to keep house for 5 years. PTSB have a 5 year at 2.35% but with 2% cashback for full value of mortage (estimated €7.5k) and 2% per month on monthly repayments if setting up some explorer account. I know people say cashbacks are not as attractive as they seem but kinda thought the 2.35% with 2% cashback for 5 years was better than 2.2% for 5 years with no cashback.

JimmyCorkhill said:

Put an offer in on a new build

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JimmyCorkhill said:

house will have good BER rating so notice some green mortgage part to the mortgages. Do potentially plan to move after 5 years, not guaranteed but would be something we would consider.

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With some (but not all) of AIB's fixed rates (e.g., their 5-year green fixed rate)

• It is quite likely that you will be able to make unlimited overpayments without penalty for the foreseeable future (see this thread)
• For the same reason, it is unlikely that there will be a break fee if you break out of the fixed rate to move home within the next few years

And with Permanent TSB fixed-rate mortgages:

• You can overpay by as much as you like each month without penalty, and this builds up as a credit on your account
• You can use this credit to take a payment holiday or to reduce the monthly repayments (or to pay off part of the principal at the end of the fixed period)
• You are only charged mortgage interest on the net balance, i.e., on the mortgage balance after the credit has been subtracted
• See this thread for more details

And with Avant:

• You can overpay by up to 10% of the outstanding balance (which is a very large amount) per calendar year
• You can only make up to two overpayments per calendar year, so you would have to save up your overpayments and pay them as lump sums

Bear in mind that, regardless of the lender, there is not always a break fee if you make an overpayment, and if there is it might be modest.

Permanent TSB and Bank of Ireland are expected to increase their rates soon.

JimmyCorkhill said:

Do potentially plan to move after 5 years, not guaranteed but would be something we would consider.

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Lenders who give very large cashback (PTSB, BOI, ESB) have tended to have higher rates, so you should usually only consider them if you feel confident that you will be moving home (or able and willing to switch to another lender) in a few years. See here for a list of reasons why you might not be able to move home (or switch lender).

Have a look at this thread (if you haven't already):

JimmyCorkhill said:

although presumably nothing to stop going with a 22 year mortgage per se?

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No. Assuming that a lender will offer that term.

JimmyCorkhill said:

BOI doing a 4 year fixed for 1.9% & a 2.2% for 5 years, would have thought the 4 years may make more sense even if required to keep house for 5 years. PTSB have a 5 year at 2.35% but with 2% cashback for full value of mortage (estimated €7.5k) and 2% per month on monthly repayments if setting up some explorer account. I know people say cashbacks are not as attractive as they seem but kinda thought the 2.35% with 2% cashback for 5 years was better than 2.2% for 5 years with no cashback.

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Don't be distracted by cashback offers as they often come from the most expensive lenders. BoI and PTSB are generally expensive lenders. Check out the many other threads relating to mortgage questions.

JimmyCorkhill said:

1. If we went with the 25 year option and overpaid throughout so that we effectively paid the mortgage off in 20 years, is the overall repayment going to be broadly similar to what it would have been if we had taken the 20 year option initially?

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Interest over the lifetime of the mortgage is irrelevant. It's best to pick as long a term as possible and then overpay when you can. This is better than a shorter term with an aggressive repayment schedule that you might not be able to meet if circumstances change.

JimmyCorkhill said:

2. If we would like to overpay monthly, initially at least, is there anything we need to look out for in relation to T&Cs with the various mortgage offers? Penalties etc.

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BoI allow you to overpay on a fixed rate without penalty by 10% every month. I do this myself and find it's a very nice feature as I just forget about it. With other lenders it's a more convoluted procedure but I don't know the details.

JimmyCorkhill said:

3. With the current economic climate & interest rates, is a fixed rate advisable for the next 3/5 years? Or is that a question for mystic meg?

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General advice is to fix if mortgage repayments are going to be a high share of income and/or there is a near-term risk to your income (eg one spouse taking prolonged time off work to mind kids).

NoRegretsCoyote said:

Interest over the lifetime of the mortgage is irrelevant. It's best to pick as long a term as possible and then overpay when you can. This is better than a shorter term with an aggressive repayment schedule that you might not be able to meet if circumstances change.

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The longer the term the higher the mortgage protection life insurance premiums.

ClubMan said:

The longer the term the higher the mortgage protection life insurance premiums.

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Do you mean a higher monthly insurance premium? Or a higher total outlay on insurance premiums over the term of the mortgage? Or both?

Paul F said:

Do you mean a higher monthly insurance premium? Or a higher total outlay on insurance premiums over the term of the mortgage? Or both?

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Both. Even if the longer term mortgage is paid off early in line with the shorter one (e.g. 25 year mortgage paid off in 20 years).

NoRegretsCoyote said:

BoI allow you to overpay on a fixed rate without penalty by 10% every month.

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Just to clarify for @JimmyCorkhill (and any others who are reading) that overpaying by 10% per month won't add up to a huge amount – say, €1,200 to €2,400 per year depending on what your regular monthly repayment is.

On the other hand, being with a lender like Avant who lets you overpay by up to 10% of the outstanding balance per year means that you are free to make very large overpayments – say, €20k to €40k per year, depending on the size of your mortgage.

Paul F said:

Just to clarify for @JimmyCorkhill (and any others who are reading) that overpaying by 10% per month won't add up to a huge amount – say, €1,200 to €2,400 per year depending on what your regular monthly repayment is.

On the other hand, being with a lender like Avant who lets you overpay by up to 10% of the outstanding balance per year means that you are free to make very large overpayments – say, €20k to €40k per year, depending on the size of your mortgage.

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@Paul F what’s AIB overpayment options?

Pinoy adventure said:

@Paul F what’s AIB overpayment options?

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See this thread: