Savings = Mortgage.. What to do?

Sorry, i missed this earlier. I was really only going by your original calcs on your mortgage interest, which won't be 20% less than the rate you are quoted, although now that I think about it again..... the 20% is based on interest only, which is the 4.75% so now it does make more sense. In the above example, yep, it does indeed look like you'd make a bit more money saving rather than putting it against the mortgage. I'd try it for 6 months or so and calculate the actual difference but you could be on to a winner all right if your mortgage rate stays at 4.75%. Better in your póca than the bank's!

Sprite
 
Im also wondering what to do. My wife and I intend to build a house on her fathers land. We have been advised a well designed high spec low energy A rated eco house would cost around €400k. We are currently renting, have no loans, no other property, combined salary €100k, and have approx €150k of hard earned savings in the Irish Nationwide earning 5% .

I heard National Irish Bank have good LTV mortgage. Looking at their website calculator, if we put all of our savings into house and borrowed €250k that would be a LTV of 63%, term 25 years , monthly repayments would be €1501.80 , 5.41% APR. This sounds affordable.

Should we be looking at something like this or would it be smarter to invest our savings in equities and get a larger mortgage? Any advice would be much appreciated.
 
You might want to start another thread for your question for more input.

The cut-off points for mortgage rates seems to be 50%, 60% and 80% LTV so there may be little point in going for e.g. a 75% LTV mortgage if that would wipe out all your savings and you could get the same rate at an 80% LTV. In your example, I'd either try and get to the 60% LTV or else not push all the money at it to get only to 63% ( I say only!)

Don't forget stamp duty and costs of furnishings and the obligatory weekly spend in B&Q (new house or no new house!) when you are done - I'd keep back at least €25k for non-stamp duty-related stuff (that includes a cushion and rainy day money).

My feeling in your situation would be to talk to NIB (or whoever - I'm with NIB so am a bit biased in their favour) and see what mortgage you can get and what you can afford (the latter being more important). Ask them to quote you rates for the various different LTVs and perhaps pick the one that gives you a good bit of leeway. Then you can either pay it down with a lump sum in e.g. 6 months (although it took me a good year to get on top of outgoings/incomings when I bought my first house - just to realise where things were at) and get a lower LTV %age (a very simple process with NIB - I did it a few weeks ago) or you can keep the rate where it is and invest the money you have left in various other things and increase your monthly repayments, coming out of income rather than capital. At any rate, I'd keep some rainy day money and not put the full €150k to the house, regardless of what rate you get. I'd keep a min of €10k but would be more comfortable with €25k

Sprite
 
As a matter of interest where do you get 5.2% on amounts higher than 10k? I'm in a similar situation and having shopped around I found that the current account mortgage was the best option to keep the liquidity and lower the interest payments.
 
I'm not aware of any accounts that give greater than 5.2% on a lump sum myself, but have a look the best buys section to see if there are any. There's nothing to say you have to keep it in a lump sum though - you could keep it in a 5% NR account and drip feed into a higher rate regular saver.

With the current account/offset mortgage, you have the advantage of actually getting the advertised interest rate (no DIRT) but you pay for it on the other hand because the rates are generally higher than an LTV Tracker.

Sprite
 
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