Key Post Your guide to trading up with a tracker mortgage

I have an article in today's Indo on this topic

Your guide to trading up on a tracker mortgage

AIB to allow trackers to be ported to a new home

Analysis of new ptsb tracker mover product


Ulster Bank changes terms for people who want to port their tracker to a new home

Bank of Ireland/ICS now allow you to move and keep your tracker

AIB and permanent tsb have recently announced products which allows people with tracker mortgages to move home and keep their tracker, although with an increased interest rate. This raises a number of interesting issues for their borrowers.
permanent tsb details the terms and conditions in a 46 page brochure and these are used to illustrate the examples given here. It is assumed that the AIB product have similar terms.

I am in mortgage arrears – what do these new products do for me?
Nothing. The tracker portability products exclude borrowers who have been in arrears or who have rescheduled their mortgages in recent years. The lenders have other products aimed at struggling borrowers, such as split mortgages and term extensions.

I am in positive equity and want to trade up – how do these products work?
Let’s say you have a house worth €300k and a mortgage of €200k which is on a tracker interest rate of 1% (ECB + 0.75%). You want to buy a house for €400k.
If you have the salary to justify it, your lender will lend you an additional €100k at their new business rate. You can transfer the €200k tracker. The rate on this will increase to 2% (ECB + 1.75%) while the term remains the same. Your repayments will rise from €900 a month at present to around €1,600 a month in total for the new mortgage.

I am in negative equity and want to trade up – how will it work for me?

Let’s say you have a house worth €200k and a mortgage of €300k which is on a tracker interest rate of 1% (ECB + 0.75%). You want to buy a house for €300k.
As you are in negative equity, you will need to have €30k cash as a deposit.
The bank will transfer the tracker mortgage of €300k and increase the rate to 2% (ECB + 1.75%). They will give you a new mortgage of €70k at a variable rate of 5.1% - the rate they charge on mortgages over 90% Loan to Value. You will have a total mortgage of €370k on a house worth €300k.

Your repayments will go up from €1,400 a month at present to around €2,000 a month in total. If you have sufficient earnings to meet these repayments, you will be approved for the new mortgage.


While our house is a bit small for our needs, we could wait a year or two before trading up. Should we trade up now or wait a year or two?
The repayments on a tracker of €300k are only €1,400 a month and €1,150 of this is repayment of capital. So not only are your total repayments very low, but you are also paying down the mortgage much more quickly that you would be on a larger mortgage at a higher interest rate. So the longer you stay in your house, the more you save.
If you expect house prices in your area to fall or to remain at the current levels, you would be better off waiting. If you expect house prices to rise, the money you save by delaying the trade-up could be wiped out by the increased cost of your new house.
There are two other factors which might encourage you to trade up now if you can.
Firstly, your lender may withdraw the product or make it less generous.(Ulster Bank has already made its tracker mover less generous since they first introduced it).
Secondly, if your personal circumstances change, you may no longer meet the lending criteria e.g. if you move jobs, you won’t get a mortgage until you are two years with your new employer. (Update 21 March. You will not have to wait two years to get a mortgage, but you probably will have to wait at least 6 months and your employer will have to confirm that your position is permanent and that your probation is finished.)


We don’t qualify for this at the moment but we might qualify in a year or two. What can we do in the meantime?
This product is not available to anyone who has been in arrears or who has had their mortgage rescheduled in recent years, so make sure to pay your mortgage in full and on time.
Many people have taken advantage of low interest rates to overpay their mortgage. This is a huge mistake. Do not overpay your mortgage. If you are in negative equity you will need 10% of the purchase price of the new house. If you have positive equity and you overpay your mortgage, you will be borrowing this money back at the new business rate.
If you are thinking of renting out your current home and renting elsewhere, don’t. This product only applies to the family home.
If you are thinking of changing jobs, bear in mind that it might reduce your chances of getting a mortgage.






Terms and conditions of permanent tsb mover tracker

  • Applies to family home only
  • You must have 10% of the purchase price of the new property, but this can come from the positive equity in your existing home.
  • You transfer the full existing mortgage to the new property but the rate is increased by 1%
  • The term remains the same for the existing tracker although the term for the additional mortgage may be longer
  • If you need an additional mortgage, it will be at the new business variable rates
  • You must buy the new property within 6 months of selling your existing property








Brendan Burgess is the founder of the consumer website askaboutmoney.com
 

Don_08

Frequent Poster
Interesting. Would it apply to people who moved abroad temporarily and rented out their property, but would be taking it back again once they moved back to Ireland.
 

dec1892

Frequent Poster
2 years with your new employer? Is this just an example of lending criteria? thought the standard practice was 6 months.....
 

diver

Frequent Poster
Might there be any hope for those of us on tracker mortgages with BofS/Certus who would love to trade up but would currently have to surrender a tracker and look elsewhere for a new mortgage?
 
Secondly, if your personal circumstances change, you may no longer meet the lending criteria e.g. if you move jobs, you won’t get a mortgage until you are two years with your new employer.
2 years with your new employer? Is this just an example of lending criteria? thought the standard practice was 6 months.....
Hi dec

I had a figure of two years in my head when I wrote the first draft. I had meant to check that out. However, the principle is valid. Your personal circumstances may change and bar you from availing of this product.
 
Might there be any hope for those of us on tracker mortgages with BofS/Certus who would love to trade up but would currently have to surrender a tracker and look elsewhere for a new mortgage?
Not a hope. They are not giving out new mortgages. The best you can hope for is that they might incentivise people to repay their trackers early.
 

dec1892

Frequent Poster
Hi dec

I had a figure of two years in my head when I wrote the first draft. I had meant to check that out. However, the principle is valid. Your personal circumstances may change and bar you from availing of this product.

Thanks Brendan. So do you think 2 years is accurate? Could effect me as I'm only 8 months into a permanent job and am considering approaching AIB when the portal tracker comes available in the summer....
 

Corinthian

Registered User
6 months to buy a new house...sounds risky. In the terms & conditions do you have to sell your old house?
In theory if you could get a bridging loan from family to buy your new house, then sell old house and transfer mortgage from old house to new house, teh pay back loan to family. It would be a safer more secure route. Probably an odd case but is there anything in the conditions that deals with this scenario?
 
Check the ptsb brochure in detail.

Home Movers Guide i

They say that they want you to sell and buy on the same day.

I agree it will be difficult to do although it used to be common place.

I would forget the bridging loan idea. If you identify a house you want to buy before you actually sell your own, get your family to buy the new house in their own name. They can then sell it to you when you sell your own home. There would be additional stamp duty of 1% and legal fees, and possibly CGT if there was a long delay, but it would be worth it.

Brendan
 

LDFerguson

Frequent Poster
Thanks Brendan. So do you think 2 years is accurate? Could effect me as I'm only 8 months into a permanent job and am considering approaching AIB when the portal tracker comes available in the summer....
ICS and presumably Bank of Ireland will restrict LTV on applications with less than 2 years in PAYE employment. AIB, Haven & KBC need you to be 1 year in PAYE employment. Permanent TSB will lend if you're 6 months in PAYE employment.

All of them require that the employment is permanent and you're not on probation.
 
Thanks Liam

I have amended the above post as follows:

(Update 21 March. You will not have to wait two years to get a mortgage, but you probably will have to wait at least 6 months and your employer will have to confirm that your position is permanent and that your probation is finished.)

dec - thanks for pointing this out.
 

GVA

Frequent Poster
This has been referred to above but if anyone had a definitive answer it would be appreciated. I currently have my house rented out (due to relocation) and am renting another property. If I try to move my tracker mortgage with PTSB, will they still consider my house my family property give that I don't actually own another property?
 

GirlTuesday

Registered User
I'm wondering the same. I've rented my two bed tracker mortgage apartment out. It's in my sole name. We live in my husbands two bed apartment (non tracker). We'd be looking to buy a larger family home in around two years time. I was in arrears. Some were capitalised and the rest paid off so all up to date now and making full repayments. Would I qualify as I have no other home in my name?
 
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If it was your original home, you should be able to avail of the deal to port your mortgage.

However, I think you would have to have been meeting your full repayments for a certain period - not sure if it's two years or 5 years.
 

GirlTuesday

Registered User
Thanks Brendan. Yes it was my home for 8 years. We won't be looking to buy another place for about 2 or 3 years. We are happy where we are at present. We have one beautiful (if I do say so myself!) daughter. We hope to expand the family in the next few years but there's no urgency on the housing situation. I will be making full repayments going forward and all arrears (and they were a very low amount) have now been sorted out.
 
Hi Girly

How much is left on your tracker mortgage? As rates are so low, you are repaying the capital at a very quick rate. When you transfer your mortgage you will pay around an extra 1%. I would expect non-tracker rates to have fall by then anyway.

So the rate differential x the amount outstanding might not be that significant.

Brendan
 

GirlTuesday

Registered User
That's a good point Brendan. There's €373,200 left on the mortgage. The rent I'm getting more than covers the mortgage and associated costs as its in a prime city centre location.
 
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