Mortgage dilemma: Low LTV vs. HTB Scheme

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bosch4life

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Hi, we are long-time lurkers, but first-time posters.

We are a couple working in IT (30s & 40s, 0 kids) and we are planning a mortgage as first-time buyers on a new-build house.

Combined gross annual income: 210k
Combined savings: 370k
Property: 400k (A2 BER rating)
Loan: 150k (15 years)
Mortgage: AIB "Green 5 year LTV fixed <= 50%" is 1k/month and 3.2% interest
Reasoning:
5-year and fixed is because of the worry of a global crisis happening very soon and having a few years for the economy to recover before us having to remortgage. While 7-year products had much higher interest rates. The loan being 15 years is to have a lower monthly payment, for the worst-case scenario of losing jobs and considering the volatility of everything. We didn't get straight answers from AIB, this is our "research", we think we could do only 5k overpayment on the fixed rate (our preference would be to do even more), which could shorten the period by ~4 years.

The problem:
We talked to AIB bank and a sales agent, but they give inconsistent and contradicting information. It feels to us that they do not fully understand things or do not have our best interests at heart. So we’d value the collective wisdom of this community instead.

Schemes:
"The Local Authority Home Loan" and "The First Home Scheme" are not for us.
The sales agent keep pushing "The Help to Buy" on us while ignoring our preference for a low mortgage.

But that made us wonder if we should go for the HTB anyway? Or should we just stick with the original plan as it might be as good as it can get?

If we would do HTB we would leave the AIB "low-interest" bracket, but in practice it looks like the difference is minuscule 3.3% vs 3.2% and sounds like AIB was overselling that bracket. For example if we would take a 280k mortgage and get the "Green 5 Year LTV Fixed >50%<=80%" then 1.9k a month with a 3.3% rate, but would allow us to get a refund of ~30k. And would still allow us to do a 2.3k monthly repayment to shorten the period maybe by 2-3 years and then have better options when remortgaging later?

We are privileged that we have a bit more options, but wondering how each would play out in the long term. AIB is convenient for us because we have accounts there, but would there be a different option more suitable for us?
 
If you have €370,000 cash to use towards buying a house for €400,000, why do you intend to borrow €150,000?




Who can claim HTB?

This page outlines who can claim relief through the Help to Buy scheme
www.revenue.ie www.revenue.ie

To qualify for HTB grant from taxpayers, you must borrow 70% of the value of the house, or €280,000.

This would involve taking on much more debt, and paying more interest, due to a grant from taxpayers worth a max of €30,000 or €35,000.

How does the extra interest to be paid by you compare to the €30,000 grant?
 
There are only 2 houses left of the 400k kind. If we are too slow, then the next one after is 500k. So we based the mortage on the worst case scenario with the intend to borrow less than approved and preferably not end up with 0 savings and be surprised by random expenses (for example, we have 20 year old car which at some point will need replacement). Getting approved for 150k and then ending taking less is faster and easier then having to get reapproved again.

Two years ago we were considering not use mortage at all and pay off house fully in cash, and in the same estate there were even better houses for 320k, i did overtimes and got many bonuses, when we saved enough, they were all gone and now even the worse ones are more expensive.

Also we do not have many people to talk to about this (family is excluded). And when having appotiments with experts, one insist that for us the "best value" is do 50% loan, the other one insist that "free money no brainer" is to end up with 70% to 90% loan. So that's why I said that they might not have our best interests in their heart.

And now it gave us a bug, even considering it, to get ~30k from HTB in the first post, but that would force us to borrow even more (280k), maybe for that we would have to go with somebody else than AIB to allows us do big lump sum payment to pay off most of the mortage quickly.
 
Last edited:
AI tells me that there is no restriction on repaying the loan once you borrow 70% up front. And I can't find anything to contradict that.

So borrow 70% on a variable rate mortgage and when you get the refund, pay down as much as you like. Then you can fix at a much lower Loan to Value.

When comparing mortgages, look only at the interest rate. Not the repayment. That varies with the term of the mortgage so it makes longer term mortgages look cheaper.
 
bosch4life said:
5-year and fixed is because of the worry of a global crisis happening very soon and having a few years for the economy to recover before us having to remortgage
Click to expand...

I am not sure of this. You have a very good income and will be overpaying your mortgage. I think a shorter fix is appropriate.

So what if interest rates rise? Your mortgage will be small and you can handle the increase.

Overall it strikes me that you are being way too conservative. Worried about interest rate rises and borrowing so little.
 
bosch4life said:
If we are too slow, then the next one after is 500k.
Click to expand...

OK, so you have approval from AIB.

Go to ptsb and apply for a mortgage for a larger amount. They should approve it fairly quickly.

After you sign the contracts for the house, you can then decide which is the best lender.

I hate ptsb because they have a long history of exploiting vulnerable customers. But they have one big feature which would suit you. When you overpay your mortgage, it goes into a credit account - the opposite of arrears. So you can overpay your mortgage without penalty. And then if the world stops turning in the way that you expect, you can just stop paying your mortgage and use up your credits without your mortgage going into arrears.


Key Post - How overpaying a ptsb mortgage works

I was vaguely aware of this but it was brought to my attention this morning by someone who is choosing ptsb because of this facility. https://www.permanenttsb.ie/globalassets/pdf-documents/mortgages/mortgage-arrears/bmk3625..-flexible-mortgage-options-aug-19..-1.05mb.pdf In simple terms, if...
www.askaboutmoney.com
 
You can also ask about a split mortgage. So get an amount variable and pay off from savings. Then the rest - get a fixed mortgage, as you had planned. The H2B goes direct to developer. It means you won't have to pay as big of a deposit. Apply for help to buy now anyways and have it ready.
 
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