The homebuyer’s quick fix: which mortgage rate should I choose?

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There are two key categories of mortgage rate options available when you’re taking out a mortgage, fixed and variable, and understanding the difference really does help. There is a wide range of fixed and variable rate products available, and you can even choose both – a split interest rate – where you put a percentage of your mortgage on a fixed rate and the rest on a variable rate – this marries the benefits of variable and fixed rates.

Your rate is also determined by your loan to value (LTV) – that is the size of your mortgage amount compared with the value of the property. For example, if your property is valued at €300,000 and your mortgage is €240,000, your LTV is 80 per cent. Typically, the lower the LTV, the lower the mortgage rate options available to you.

This is our quick guide to understanding which rate will suit you best.

FIXED RATE

With a fixed rate mortgage, the interest rate doesn’t change for the fixed rate period. This brings certainty and stability as you know exactly what your home loan payments will be each month regardless of interest rate fluctuations and making budgeting easier

  • You can choose the period you would like to fix your mortgage for – there are fixed rate products available between one and 10 years
  • With a Bank of Ireland fixed rate mortgage, you can overpay by up to 10 per cent of your monthly repayment each month if you have the cash available. If you make a lump sum payment, repay your mortgage in full or switch to a variable rate during the fixed rate period – a fixed rate breakage fee may apply
  • It is also worth noting that you can bring your fixed mortgage with you if you move to another home as long as your new mortgage is drawn down within six months of redeeming the old mortgage.

Fixed rate products are also available to existing Bank of Ireland customers and in many cases there is a fixed rate product which could save them money.

John O’Beirne, Head of Mortgages, Bank of Ireland, commented: “Currently, three quarters of our new owner occupier mortgage customers are opting for a fixed rate, and the proportion is higher amongst first-time buyers, with 85 per cent choosing the certainty and stability of fixed repayments in the current low interest rate environment.”

VARIABLE RATE 

With a variable rate mortgage, your monthly mortgage payments could rise or fall at any time.

A variable mortgage interest rate gives you the option to make overpayments, lump sum repayments, or repay the loan completely, without having to worry about early repayment charges.

TWIN RATE

A twin rate mortgage is a helpful option if you want a level of certainty on your monthly repayments, while retaining a degree of flexibility to make a lump sum payment if you have cash available. With a twin rate mortgage, you can choose to put a portion of your mortgage on a fixed rate and the remainder on a variable rate. You can decide how much you want to fix and how much you want to retain on a variable rate. It could be 80 per cent fixed and 20 per cent variable, or 50 per cent fixed and 50 per cent variable, and so on.

HELP! I’M STILL LOST 

To better understand the options, sit down with a Bank of Ireland mortgage expert who can take you through the different options available and answer any questions you might have. Don’t be afraid to say you don’t understand – it’s their job to decipher the tech talk so that you can make like-for-like comparisons on which option suits you and your home purchase best. In the meantime, you can find out more by visiting bankofireland.com/mortgages.

Alternatively, call 1890 365 345 any time from 8 to 8 on weekdays and 10 to 2 on Saturdays. Or you can talk to a Bank of Ireland mortgage expert via Skype or Facetime.

Bank of Ireland Mortgage Bank trading as Bank of Ireland Mortgages and The Mortgage Store is regulated by the Central Bank of Ireland.

There are lending criteria, terms and conditions and security and insurance are required.

The post The homebuyer’s quick fix: which mortgage rate should I choose? appeared first on MyHome.ie Advice & Blog.

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