I want to fix, but leave some variable so I can repay it early

[BusyAtMaths]

Hi Brendan,

I'm interested in Splitting my mortgage into part fixed and part variable, so that I can pay a lump sum each year. I understand that essentially, the lender will issue two mortgages and I need to tell them what percentage I want to split them e.g. 90% Fixed, 10% Variable.

If I wanted to pay off 10,000 EUR each year, how should I calculate what percentage split the mortgage should be? Obviously I don't want to overcompensate the Variable percentage as it is much higher (presently).

Example:
Mortgage amount: 300k
Lender BOI
3.0% Fixed 3 years
4.2% Variable

 

[Fire away]

Hi busy, I'm not a expert but reckon you would be better fixing whole amount and saving rest to pay down when fix period is up. I doubt the bank will let u go variable for 30k and 270k fixed. Check with bank see if they will let u overpay on fix some do to limit of 10% or 1000pa

 

[BusyAtMaths]

Thanks Fire away. Yes, that's the plan at the moment, putting any lump sum that comes my way aside until fixed rate finishes.. I know KBC allows lump sums up to 10% while within a Fixed Rate term (they don't shout about it but they can also change this policy at any time).

The figures above were just an example - I'm curious how one should even attempt to work out what percentage split is appropriate to one's needs!

 

[Brendan Burgess]

In normal times, there would be a straightforward answer to this question.

But the market is so dysfunctional at the moment in that those lenders with the best fixed rate deals often have very high variable rates. The best fixed rate deal on offer for a 90% LTV mortgage is probably the three year Bank of Ireland mortgage at 3.2% with 2% cash back. But their variable rate is 4.5%.

So it seems wrong to have any part of your mortgage variable at 4.5%.

I understand that Bank of Ireland allows you to repay 10% of the capital without penalty. (Can anyone confirm this?)

So it would be wrong to go 90% fixed and 10% variable when you can pay the 10% anyway.

Alternatively, you could take your chances and just pay the early repayment fee. It seems that anyone fixing now, August 2017, will have a very low early repayment fee.

Yet another approach, would be to fix for just one year at 3.35% and, if early repayment is too expensive, then save up your "overpayments" and pay down the mortgage when the year is up and then fix again for a year.

Or you could just go with KBC and fix at 2.9%. But even their variable rate is 3.5%.

For lower LTVs, the difference between fixed rates and variable rates may not be as stark.

Brendan