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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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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Why are investment funds buying up Irish Property?

Large-scale private rented sector (PRS) investors, sometimes called vulture or cuckoo funds, have rapidly become a major force in the Irish property market over the last few years.

As recently as 2017, these funds were a minor and insignificant part of the housing market. However, these firms have spent more than €6 billion buying Irish homes, apartment buildings, and commercial properties over the last three and a half years.

The cuckoo funds show no sign of slowing down in 2021, as they have spent €1.5 billion so far this year, according to recent figures from estate agents and property adviser JLL. Most of these funds are backed by international investors, and have quickly become big players in the market, particularly investing in deals for new apartments in Dublin.

But what is driving this relatively new and rapidly growing force in the market?

Analysts say that an influx of cash in European markets, lack of yields in traditional assets including bonds, and the huge surge in housing demand and high rent prices in Ireland have combined to create a very lucrative …

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Advantages and Disadvantages of a long-term mortgage

In a major market innovation in the Irish Mortgage Market, Finance Ireland and Avant Money have introduced new long term mortgages. While longer term mortgages have never really took off in Ireland, they are very popular in other parts of Europe and worldwide. These mortgages can be attractive to borrowers for a number of reasons, but it is important to also consider the potential downsides before making the switch.

Pros

One of the biggest advantages provided by long term mortgage products is certainty. Unlike a two or three year fixed term, a 10 or 20 year mortgage will allow your monthly mortgage repayments to remain unchanged throughout the duration of the loan. This reliable and predictable payment can be very helpful when planning out your monthly and yearly personal finances. It also can be very helpful in determining what your home will cost after factoring in interest. With a long term fixed rate, you will be able to know exactly how much the home will cost you right away, while a shorter term fixed rate will change over the lifetime …

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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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Central Bank warns of New Home shortage

House prices have been surging in Ireland lately, and the new home market has been hit especially hard. The rise in house prices has been caused by a number of factors, and significantly accelerated due to the economic strains of the Covid-19 pandemic. Two recent reports from property websites myhome.ie and daft.ie have suggested that home prices are currently inflating at a 13 percent annual rate. Now, the Central Bank has warned that the pandemic will have a significant affect on the housing supply for the foreseeable future. The Central Bank projects that approximately 25,000 fewer new homes will be built between 2020 and 2023 when compared to pre-pandemic projections.

Among the many factors already driving an increase in pricing has been pent up savings. Consumers have had significantly less things to spend money on since March of last year, especially during those times when the country was under level 5 lockdowns-the strictest possible measure. People have not been able to shop at non-essential retail stores, eat or drink at their favorite pubs, or commute to work, leading to a …

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What is the Help to Buy Incentive?

The Help to Buy incentive is a program from the Irish Government that provides relief to first time buyers of a new home or apartment. The amount of relief granted through this incentive was recently increased due to economic pressures brought on by the Covid 19 pandemic. In the July 2020 Jobs stimulus package, the Government increased the amount of relief available temporarily through 31 December 2020. With the passing of Budget 2021, this increased relief has been extended to 31 December 2021. The incentive gives a refund of income tax and Deposit Interest Retention tax (DIRT) paid in Ireland over the previous 4 years to qualifying first time buyers.

Help to Buy only applies to properties worth less than €500,000, and the home or apartment must be new or self built. To qualify for Help to Buy, you must be a first time buyer who either buys or self-builds a new residential property between 19 July 2016 and 31 December 2021. However, the Help to Buy scheme does not apply to rental or investment properties. The scheme is limited …

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5 Mortgage tips for first time buyers in Ireland

If you’re buying your first home in Ireland, chances are you will need to finance it using a mortgage. Getting a mortgage is a very big commitment, and may seem overwhelming, especially considering that if you miss too many payments, the bank may foreclose your home. However, mortgage approval rates for first time buyers are on the rise, and if you’re feeling uneasy, here are 5 tips to make the process a little less scary.

1. Budget and save effectively

You won’t get a mortgage without having a deposit ready, so it is important for prospective homeowners to open a savings account and start budgeting for their deposit. The lender will be looking to determine your ‘repayment capacity’, assessing your current expenses and financial situation. Mainly, they will be looking to see that the amount you save each month is greater than or equal to your mortgage costs. Be sure to limit overdraft fees and excessive spending, particularly gambling-related expenses, on your bank statements, as this will look bad to lenders.

2. Have a good credit rating

It is essential …

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Mortgage arrears in Ireland fall despite pandemic’s economic effects

Over the past year, the covid-19 pandemic has caused many economic challenges for Irish citizens and people worldwide. Between level 5 lockdowns, business closures, and soaring levels of unemployment, it would be logical to believe that people may be falling behind on payments, especially mortgages, which are most people’s largest and most important monthly payment. However, recent data shows that the number of mortgages in arrears actually  decreased during the first quarter of 2021, despite level 5 lockdowns and record high unemployment rates.

Recent data from the Central Bank shows that the number of family home loans in arrears decreased by 2,838 during the first three months of 2021. During this period, the Covid-adjusted unemployment rate hit its peak of 25.1 per cent in early January, as thousands of businesses were forced to close their doors due to level 5 lockdowns. This is surprising given that the number of people behind on their mortgage payments actually decreased, while conventional wisdom would expect to see an increase in arrears. This contrast suggests that government supports, such as pandemic unemployment benefits, have …

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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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