NoRegretsCoyote
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Bear in mind that some borrowers will be trading up from a home with significant equity. In those circumstances, it may make sense to opt for a variable rate if the borrower intends to pay off the mortgage in short order once the first home is sold.Am just astonished at the free money so many customers are leaving on the table by not choosing a fixed rate.
Bear in mind that some borrowers will be trading up from a home with significant equity. In those circumstances, it may make sense to opt for a variable rate if the borrower intends to pay off the mortgage in short order once the first home is sold.
Seems about 20% of new mortgages are on variable rates, paying about 80bp more.
FTB here with AIB - fixed 80% of the mortgage for three years for 2.45% and 20% variable at 2.95%. I plan to overpay monthly.
This is a complete false economy. You are paying an extra €300 a year on a €300k mortgage. You would need be overpaying at about €900 a month on a €300k mortgage to break even.
It makes more sense to fix the whole amount and just "overpay" into a deposit account at 0% and then overpay when the three-year term is finished. Or if your repayment capacity is that good just look for a shorter term.
I did check the extra interest payments- and I would be in year one worse off by 211 Euro without any overpayment, in year two by 209 Euro and 205 in year three. May I ask how did you calculate the break even?
Apologies I didn't get the calculations wrong by quite a bit.
I think it's more like needing to overpay 300k a month on a €300k mortgage to break even. This scales, so €100 a month on a €100k mortgage.
This is a common misconception that comes up frequently. Just to clear it up, the break fee will ALWAYS be less than the interest saving by paying it off early. Putting it in deposit at 0% and waiting until the end of fixed term is just throwing money away.It makes more sense to fix the whole amount and just "overpay" into a deposit account at 0% and then overpay when the three-year term is finished
This is a common misconception that comes up frequently. Just to clear it up, the break fee will ALWAYS be less than the interest saving by paying it off early.
'more sense' is the key to your statement.And in that scenario it makes more sense to fix the full amount and accumulate in a deposit account til the end of the term (unless your planned overpayments are very large).
Say you've an extra 100 per month, and you've fixed for 3 years @3% interest. If you pay that 100 monthly, rather than as a lump sum at the end of 3 years, you'll have saved €162 interest.
Any additional administration work is the responsibility of the bank, not the borrower.
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