fixing for 5 years at 2.99% or for 10 years at 3.45%

[Barbarossa82]

Summary of Assets and Liabilities
Family home worth €270kk with a €200k mortgage
Property

Family home mortgage information
Lender AIB
Interest rate 2.45%
If fixed, what is the term remaining of the fixed rate? 3 years
Second home worth 290k where my mother lives in abroad - mortgage left on that is 90k. The plan is my mother gifts me the home and I remortgage for 290k in the home country paying off the Irish mortgage with the additional 200k.

Mortgage rates received are 2.99% for 5 years or 3.45% for 10 years.


What specific question do you have or what issues are of concern to you?

Am not sure if I should go for fixing for 5 years or for 10. As I do not know if I can get in 5 years a mortgage which is cheaper than 3.45%.

thanks

 

[Brendan Burgess]

Hi Barbarossa

That is a bit difficult to follow.

Are you saying that in the other country, the interest rates are lower? So you can borrow on the security of your investment there and thus repay the mortgage in Ireland?

Is the other country in the eurozone? If so, it's a valid transaction. But if you are borrowing in another currency then you are taking on currency risk and it's not a good idea.

So your question is "Should I borrow for 5 years or 10 years in another country?". It would be best to get advice on this in the other country.

But the AIB 5 year rate is 2.45% so why would you borrow at 2.99% outside Ireland?

The AIB 10 year rate is 3.2%, so again cheaper than in the other country.

So your decision, if I understand your question correctly, should be "Should I borrow for 5 years at 2.45% or 10 years at 3.2%?"

No one knows for sure, but I think that 5 years is better.

Brendan

 

[Barbarossa82]

Hi Brendan
thanks for the advise! Yes in the Eurozone. And you are right - it doesn't make sense to consolidate in my home country as it is more expensive now. Better keeping the Irish mortgage for the next 5 years.

Thanks again!