Pros and cons of a variable rate mortgage

A variable rate mortgage is a mortgage in which the interest rate on the outstanding balance changes periodically. Typically, these loans will have fixed, or “teaser” interest rates for a specified amount of time, after which the interest rate will change based on a variety of factors. In most cases, the initial interest rate on a variable rate loan will be lower than a fixed rate, which can be appealing for homebuyers. But it is important to be aware of the pros and cons before jumping into a variable rate loan.

Pros

Flexibility

The number one advantage of a variable rate mortgage is flexibility. With a variable rate mortgage, you don’t need to worry about penalties for things like increasing your monthly payment, or paying off your mortgage early. You also have the ability to make lump-sum payments on your mortgage throughout the year, which can be very helpful for home buyers with a fluctuating income affected by bonuses or commissions. If your life is likely to change relatively soon, and you plan on eventually moving or selling the house, …

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How do mortgages work?

If you’re looking to buy a home, you’ve probably already realized that this is not like most transactions. The average house price in Dublin is €396,000, and unless you’re very wealthy, you probably don’t have anywhere that much in savings. Because you likely can’t afford an expense of this magnitude out of your own pocket, you will need to finance the purchase through a mortgage, and if you’re new to the home-buying process, you may be a little confused as to how exactly these loans work.

A mortgage is a huge loan secured against the value of your house. A “secured” loan means that the borrower promises collateral to the lender in the event that they are unable to make payments, and in this case, the collateral is your home. In other words, the bank will kick you out and take possession of your house if you can’t make payments. In order to prevent this from happening, the lender will typically conduct a detailed review of the borrower’s finances in order to determine how much they can reasonably afford to …

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Buying a home vs. Renting: Which is better?

Buying your home is one of the biggest financial decisions of your life. However, it is a big commitment and there are a lot of hidden costs and factors that can make it unaffordable for some. Because of the costliness of buying a home outright, many buyers turn to renting instead, especially in expensive housing markets like London, New York, and Hong Kong. Determining which option is best for you depends on a variety of factors, and not everyone’s situation is alike. To help with this important decision, let’s take a look at some of the key differences between buying and renting.

Buying

When buying a house, it’s likely you’ll need to apply for a mortgage. To get a mortgage, you need a deposit (usually at least 10% of the home’s value) and a steady income in order to make repayments. The greater your deposit and income, the more your bank or lender will be able to offer you. However, if you live in an expensive area, or have a low salary and little savings, buying may not be for …

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New Green mortgage offering one of Ireland’s lowest rates

AIB’s mortgage subsidiary Haven has launched a new, four-year, fixed rate green mortgage with one of the lowest rates currently available on the market.

Haven is a wholly-owned subsidiary of AIB which focuses solely on mortgage distribution through brokers. They offer a broad selection of fixed and variable rate mortgages to customers including first time buyers, movers, switchers, and investors.

The mortgage has a rate of 2.15 percent, and applies to both new and existing customers with a Building Energy Rating (BER) of between A1 and B3. The BER cert must also be less than 10 years old in order to be eligible. All new builds are expected to qualify for the low rate, and existing customers who remodel their home to meet the BER requirements will also qualify.

According to AIB, this low rate could result in substantial savings for the average customer. The lender reports that the new rate allows customers of a 25 year, €300,000 mortgage to save €155 monthly. This equates to a savings of €1,800 per year over the lifetime of the loan, when compared …

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How you can be approved for a mortgage in Ireland despite Central Bank’s rules

It’s no secret that house prices are continuing to rise in Ireland. Because of this, it is more important now than ever to maximize the amount that you are allowed to borrow. The Central Bank’s rules often do not make this process any easier, as many have criticized the Central Bank on its restrictive rules in terms of how much people are allowed to borrow. To be approved for a mortgage in Ireland, you first have to fall within the Central Bank’s income rules. Second, your lender will evaluate your repayment capacity.

First, the Central Bank restricts lenders to loans of 3.5 times the borrowers’ income (joint and single), unless they are granted an exemption. This means that someone making €40,000 can borrow up to €140,000, and a couple making €100,000 combined can borrow up to €350,000, respectively.  However, to be approved for a mortgage, they must also pass a stress test, per Central Bank rules. This tests the ability of the borrower to repay the loan each month should interest rates rise by 2 percent above what the lender …

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What does it mean if your mortgage is in arrears?

The mortgage on your house or apartment is one of the biggest and most important financial commitments that most people have. If you fall behind on these payments, it could put you in a very difficult  place financially. When you miss mortgage payments, you may fall into what’s known as mortgage arrears. If you fall into arrears, your lender may eventually repossess your home. This is why it’s important to contact your lenders Arrears Support Unit as soon as you fall into arrears, or even pre-arrears. However, repossession is a last resort for your lender, as they generally want you to make all your payments on time. This is why, before they repossess your home, your lender is required to offer a Mortgage Arrears Resolution Process (MARP), per central bank guidelines. Under the MARP, your lender will offer a variety of solutions to help you pay back what you owe, in addition to paying back the amount in arrears in full.

If you enter the MARP, your lender will first conduct an assessment of your financial situation and your ability …

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Why are Mortgage Interest Rates so High in Ireland?

Recent reports from the Central Bank of Ireland indicate that mortgage holders in Ireland are still paying much higher interest rates as compared to most of their  neighbors in Europe. Therefore, why are people in Ireland paying high mortgage rates and is there a way to reduce it? Currently the  interest rate for a first-time buyer is at 2.79 percent, which means that it is now the highest in all of the 19 countries in Europe together with Greece. Despite the fact that the interest rates have dropped by 0.11 percent as compared to last year, they are still way more than what is being charged in other places in Europe where the average rate is as little as 1.31 percent. 

In a report by the Banking and Payment Federation of Ireland (BPFI), the mortgage for a first-time-buyer in Ireland is approximately €225,000. Basically, this means that someone who borrows this amount with the hopes of repaying it in 30 years ends up paying an extra of €167 per month and over €2,000 annually as compared to other countries …

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5 Ways to save for a Deposit

Saving up to buy a home can seem like a big challenge. Your home is likely the biggest purchase you will ever make, and unlike saving for retirement, this payment is a large sum of money that you will need to access soon. This may seem challenging, but with a solid savings plan, anyone can save enough to put a down payment on their dream home. In this article, we’ll cover 5 easy ways to start saving for your down payment today.

 

Budget your money wisely

The first and most important step in any savings plan is budgeting. To build your budget, examine your bank statements and credit card payments to see where your money is going. Make sure to keep track of how much you spend on necessary payments, such as rent, utilities, and student loan payments if you have them. Next, consider how much you spend on eating out, entertainment, and other nonessentials. While you are saving, it is a good idea to set limits on each of these categories and stick to it, setting aside the …

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Costs you Should be Aware of before Buying a House

There are more costs associated with buying your first home than just the 10% deposit. There are many additional fees, duties and taxes that you should be aware of before buying your home. 

 

The first fee you should be aware of is the stamp duty. The stamp duty is not included in your mortgage, so it’s a good idea to save this fee up in addition to your 10% deposit. The stamp duty is calculated at 1% of the selling price on a home or residential property of up to €1m, and 2% of the selling price on homes and residential properties above €1m. This stamp duty may change however, and full details are available on the Revenue.ie website. 

Legal fees are another hidden cost of buying a home that you should look out for. There are a lot of legal aspects that have to be accounted for when officially transferring ownership of the property to you, so you should find a trusted real estate lawyer to take care of this transfer. Legal fees will vary depending on …

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4 Easy Ways to Improve your Financial Literacy

Financial literacy is one of the most important and underrated skills that anyone can have. Understanding basic financial concepts such as mortgages, inflation, and interest rates is critical for financial success. Once you unlock this knowledge, you will be better equipped to effectively manage, save, and invest money for you and your family. This knowledge, combined with other good financial habits, is the key to financial well being and freedom later on in life. While everyone has varying degrees of financial literacy, there is an overwhelming amount of resources available to expand your knowledge on financial topics.

 

Read Personal Finance Books

If you enjoy reading, there is no shortage of finance books that cover a broad variety of topics, from eliminating debt to saving for retirement. One book recommended by Forbes magazine that covers the latter is Rewirement: Rewiring The Way You Think About Retirement!, by Jaime Hopkins. This book tackles common misconceptions and bad habits that prevent people from having flexible and successful retirement plans. For a variety of books on many topics, check out Insider’s …

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