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Friday 19 September 2014

Keen to move home? Don't forget to bring the tracker mortgage

Published 06/04/2014 | 02:30

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Nama and the Government have fought to keep property prices artificially high

IF you've been itching to move house, and the only thing holding you back is your fear of losing your cheap tracker mortgage, you shouldn't have to wait much longer before you can move and take your tracker with you – if you have to wait at all.

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Last week, KBC Bank became the latest bank to start offering tracker-mover mortgages – where you can move house and carry your tracker mortgage over to your new home loan.

AIB and EBS will follow suit this summer, and Permanent TSB will fully launch its tracker-mover mortgage in early May. Bank of Ireland and Ulster Bank already offer tracker-movers.

Like all loans, it's important to understand what you're getting into before snapping up a tracker-mover.

* Who offers the best deal?

You can't shop around lenders for tracker-movers – you are tied to the lender you have your existing tracker mortgage with.

As AIB, EBS and Permanent TSB allow you to carry over your tracker mortgage until your tracker is repaid, these lenders offer the best movable trackers.

KBC also allows you to carry over your tracker mortgage for the rest of your tracker mortgage term – however, the additional interest it charges on your tracker rate is higher than the other three lenders.

Under its tracker-movers, AIB, EBS and Permanent TSB charge an additional 1 per cent interest on top of your tracker rate. KBC charges an additional 1.25 per cent interest – which makes its tracker-mover deal one of the most expensive out there.

BoI and Ulster Bank's tracker-mover mortgages come with a major drawback – they only allow you to keep your tracker for five years and after that you'll be hit with the lenders' standard mortgage interest rates. Your mortgage is therefore likely to be a lot more expensive after five years.

Bank of Ireland charges an additional 1 per cent on top of your tracker rate – until the five-year cut-off point.

The additional interest you pay on top of your tracker with Ulster Bank depends on the tracker rate you have and how much of the value of your home you are borrowing.

If borrowing up to 90 per cent of the value of your new home, you'll pay extra interest of between 0.5 and 1.25 per cent – again, until the five-year cut-off.

Regardless of your lender, if you are borrowing any money in addition to the tracker mortgage you are carrying over, the interest you pay on the balance will be at your bank's more expensive current lending rates.

* Can I get a tracker mover if I'm in negative equity?

Yes. If you're in negative equity, you can usually carry over your existing tracker mortgage – as long as you're selling your existing home and buying a new one.

Lenders limit the loan-to-value ratio (LTV: the percentage of the price of the new property that you are borrowing) of your new mortgage. This ltv includes the negative equity that is being carried over to the new property.

With Ulster Bank, the maximum ltv is 200 per cent; with AIB and BoI, it's 175 per cent; with KBC and Permo, it's 125 per cent if trading up. If you're in negative equity and want to trade down rather than up with Permo or KBC, the maximum ltv is 175 per cent.

If you're building your own home, the maximum ltv could be lower than that typically offered by your lender. With Bank of Ireland, for example, you can borrow up to 125 per cent if it is a self-build.

Think twice before signing up to a mortgage with a high ltv. It's not that long since banks were lambasted for offering the 100 per cent mortgages that exacerbated the problems of homeowners who fell into negative equity.

Taking on a mortgage that is twice – or almost twice – the value of the property you are buying is not a good idea. Carrying over the negative equity on your existing home to another loan means that you're crystallising the losses on your home and so you ultimately will have to bear the brunt of any negative equity that has built up in it. It could make more sense to move – and rent out your home until house prices recover more.

* Must I sell my home before applying for a tracker mover?

No – you usually apply for your mortgage before selling your home. Once you sell your home and repay the existing mortgage on it, you typically have a certain amount of time to find the new home you wish to buy. With BoI, for example, you have six months.

* Who doesn't qualify for tracker movers?

If you're in mortgage arrears or restructured your mortgage recently to resolve an arrears problem, you're unlikely to qualify. If you haven't been in a steady job for at least a year, you could also run into trouble getting a new mortgage. You cannot carry over buy-to-let trackers. Similarly, you can only take one when moving to a property that will be your main home.

* Who doesn't offer tracker movers?

If you have a mortgage with Bank of Scotland, Danske Bank or Irish Nationwide, your chance of getting a tracker-mover are slim. Bank of Scotland and Danske Bank are not planning to launch tracker-mover mortgages or to hook up with another lender who offers them.

A spokesman for IBRC, which is in liquidation and is handling the mortgage book of Irish Nationwide, would not say if Nationwide borrowers had a chance of getting a tracker-mover mortgage. Last week, more than half of a portfolio of mortgages being sold by IBRC's liquidators were bought by two US funds – Lone Star and Oaktree Capital.

* I'm currently sale agreed on a property, but my bank has not yet launched its tracker mover. Could I still get it?

If the sale goes ahead before your lender launches its tracker-mover deal, it's unlikely you'll get its tracker-mover mortgage.

If the sale goes ahead after your bank launches its tracker-mover, you might be able to cancel your existing mortgage application and apply for the tracker mortgage. It depends on your lender.

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