An opportunity for home owners amidst rising house prices

The average house price in Ireland has risen 11.2% over the past year, and prices in at least 8 counties are currently rising faster than that immediately preceding the market crash. Rapidly rising prices, low interest rates, and insufficient supply are together representative of the current situation in Ireland’s property market. Although this situation has many market watchers worried about possible inflation, and is definitely a hindrance to buyers still seeking for a home at an affordable price, there is a perk that could result for homeowners with an existing mortgage.

 

This blog post will illustrate this hidden opportunity and give homeowners the necessary knowledge if they intend to pursue it.

 

For homeowners with a high standard variable or fixed rate mortgage, your interest rate is most often based directly on your Loan-to-Value  ratio (LTV). The loan to value ratio is ratio of your loan to the value of your property. Each lending institution may have a different way of calculating and determining your interest rate but in general, the higher your LTV, the higher your interest rate. In other words, the smaller the percentage you put down as a deposit, the more your interest payments will be.

 

However, as the value of homes across the country rise, the LTV ratio becomes distorted. When the price of your home has increased significantly, while amount of your loan has stayed the same, you true LTV ratio decreases: your loan becomes a much smaller percentage of the value of your home. And since many loans offered in the past few years have been based on LTV ratios, it may be possible for home owners to ask their lender for a better interest rate.

 

This presents a great opportunity for home owners, especially those who have taken out a mortgages that had a high LTV ratio at the time. Switching to a mortgage with a lower LTV could mean receiving an interest rate that is as much as 0.5% lower, would save borrowers a lot of money in the long run. Compared to the process of switching mortgage lenders for a better rate that is gaining popularity today, it may be a much easier process for borrowers to simply to be switched to a different mortgage within the range of products their lender offers.

 

Considering that the average house price in Dublin has risen from €243,155 to €358,371 over the past five years, home owners with LTV based mortgages have a lot to gain. Just hop on over to your lender, since it never hurts to ask.

https://www.irishtimes.com/business/personal-finance/how-to-turn-rising-house-prices-into-a-cheaper-mortgage-1.3153721

Leave a Comment

Awesome! You've decided to leave a comment. Please keep in mind that comments are moderated.

*