Buying or planning to switch? How you can avoid rip-offs
Published 21/09/2015 | 02:30
The chances of getting a bad deal, or even being ripped off, are huge for both new buyers and those switching mortgage providers.
Here are some of the issues to consider, whether it is your first mortgage or you are opting for a new lender by moving your mortgage.
Be wary of cash deals
Bank of Ireland has a deal at the moment where it is offering cash-back representing 2pc of the mortgage amount, for both new buyers and switchers.
This "cash-in-the-hand" offer is proving very attractive. It represents €2,000 on every €100,000 borrowed.
But you will get lower mortgage rates from the likes of AIB or EBS. This means that typically after just eight years, you would be better off at AIB.
Fixed or variable
Many banks have refused to reduce their variable rates, despite demands from Finance Minister Michael Noonan. They have instead offered attractive fixed rates. But be aware that you are locked in with a fixed rate, for the period of the deal.
Some mortgage experts think variable rates may fall again.
Banks' history of care
Before opting for a particular bank, ask yourself how good is that lender's customer care.
Cost is not the only consideration. Standards of service are also important. Has the bank a history of overcharging, and how does it deal with those in mortgage difficulty?
Central Bank rules
First-time buyers need a deposit of 10pc on the first €220,000 and 20pc of any balance above €220,000. The loan-to-value restrictions do not apply to switcher mortgages. Second-time buyers need a 20pc deposit.
There is also a limit of 3.5 times gross annual income for all new mortgage lending for homes, with some scope for flexibility. This includes lending to people in negative equity who are applying for a mortgage for a new property.
Most lenders will insist that you take out mortgage protection insurance, a type of life insurance policy that pays off your mortgage if you die before the end of the term.
Your lender will often offer to sell you a policy, but you don't have to buy it from them and, indeed, it can be much cheaper to buy elsewhere.
Frank Conway, of website Irish Financial Review, says that if you choose a mortgage broker, they should have agencies with a number of mortgage protection providers, while banks are likely to have a more limited range and often just one.
Term of mortgage
The longer the term of your mortgage, the cheaper the monthly repayments will be. However, stretching out the term means you end up paying more in interest over the life of the loan.
So opting for a 20-year mortgage is better than one for 35 years, if you can afford it. Also, you do not want to be still repaying your home loan in your late 60s.
Avoid being rushed into a decision by a lender, or by the people selling you your home. Remember, this is the biggest financial decision of your life.
Affordability is the key when taking out a mortgage, or switching.
Do not leave it up to the bank to work out what you can realistically afford. Be prudent and do not over-extend yourself. Work out what you will have left each month after the mortgage repayment.
Consider moving your current account
Both AIB and KBC offer interest rate discounts to new buyers and switchers prepared to pay for their mortgage through the banks' current accounts. This could make these lenders worth considering.
How are existing mortgage holders being treated?
When taking out a mortgage with a bank, make sure that lender is passing on any rate reductions to existing customers. Both Bank of Ireland and KBC are offering rates to new customers, but will not offer these to existing customers.