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Saturday 19 August 2017

Mortgage 'sweeteners' could make your loan €30,000 pricier

Sweeteners may cost you money
Sweeteners may cost you money
Independent.ie Newsdesk

Independent.ie Newsdesk

Homeowners could pay tens of thousands of euro more in interest than they need to by taking up a mortgage sweetener - because the lenders that offer these perks usually work out more expensive in the long run.

In fact, the additional cost for a first-time buyer borrowing €200,000 from such as lender could be as much as €30,000.

The best sweeteners are offered by Bank of Ireland, Permanent TSB and Ulster Bank. These lenders are, however, the most expensive for a first-time buyer who uses a variable mortgage to borrow about 90pc of the value of their home.

Bank of Ireland and Permo both have mortgage cash-back offers, where borrowers are given €2,000 cash for every €100,000 borrowed.

Bank of Ireland and Permo are two of the most expensive lenders for a first-time buyer borrowing €200,000 over 30 years to buy a home priced at €225,000. Bank of Ireland charges 4.5pc interest on a variable mortgage, while Permo charges 4.2pc. EBS, however, one of the cheapest lenders, charges 3.7pc interest while AIB charges 3.75pc.

Bank of Ireland's cash-back offer is worth €4,000 on a mortgage of €200,000. However, the interest charged by Bank of Ireland on this €200,000 mortgage over 30 years adds up to €165,000, compared to about €133,000 with AIB and EBS.

So you'd pay €32,000 more interest over the lifetime of your mortgage by going for Bank of Ireland instead of AIB or EBS - or €28,000 more if you deduct the €4,000 sweetener from the bill. Permo charges about €152,000 for the same mortgage. That's about €19,000 more than AIB and EBS - or €15,000 after taking the value of its cash-back offer into account.

Ulster Bank offers a €1,500 contribution toward legal fees for all new mortgages.

However, Ulster is the second most expensive lender for a first-time buyer getting a variable mortgage of €200,000 to buy a home worth €225,000.

It charges 4.3pc interest - which adds up to €157,000 on such a loan over 30 years. So taking up Ulster Bank's sweetener instead of choosing a cheaper lender would cost €24,000 in extra interest - or €22,500 once the €1,500 perk is factored in.

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