Business Personal Finance

Wednesday 18 September 2019

Your Questions: How can we move house and hold on to our tracker mortgage?

 

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Charlie Weston

Charlie Weston

Question: We bought our home 10 years ago when our first child was on the way. During those years we have had two more children and the house has become a little cramped, to say the least. We want to buy a bigger home, but we are reluctant because we are fortunate enough to have a tracker mortgage and we really do not want to lose it. Is there any way we can hang on to it?

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Answer: The answer is that you can retain your tracker. But obviously you will have to stick with the same lender and transfer your tracker rate to your new mortgage, according to Joey Sheahan, head of credit at MyMortgages.ie.

However, you may be aware that, because of the low European Central Bank rates, lenders are not in the business of offering tracker rates any more.

Say you have €180,000 left on your current mortgage, but you are buying a house for €300,000. It is likely your bank will allow you to keep your tracker rate on the remaining €180,000 on your current mortgage, and it may add an additional margin onto this, typically an extra 1pc.

But you will then only be offered the current lending rate on the additional €120,000 on the new mortgage, Mr Sheahan says. It might sound a bit convoluted and in practice the process is a little complex, but if you take expert advice, you should move through the process fairly seamlessly, he added.

That is providing you have all your other ducks in a row - salary, good banking history, deposit and so on.

Question: My health insurance policy is due for renewal soon. I spent some time on a comparison site but when I contacted my insurer they suggested different plans and the pricing was different to that of the comparison site as well. Could this be correct?

Answer: The answer here is yes. These comparison sites are only as good as the mapping that has been used to compare the plans and therefore different outcomes may result when you actually speak to a qualified adviser, according to Dermot Goode of TotalHealthCover.ie.

Given the number of plans in the market, you should never totally rely on any comparison site for your final product choice but they are good for giving you high-level information on the options available, he says.

As you did, always engage with the health insurer(s) or preferably an independent adviser as only these are regulated and qualified to give you a full product recommendation to match your needs.

Also, most comparison sites show you current rates in the market but as your policy is not due for renewal for a while, rates may change in the interim which probably explains the price differential, Mr Goode added.

Question: In the media we often read about the importance of financial planning. But what do people mean by this? I want to begin planning but I don't know where to start.

Answer: By asking this question alone you already taking steps in the right direction. Every household should have some form of financial plan or budget in place.

However, the form or detail of this plan will change depending on the household. Some people, particularly those who are self-employed or where their employer doesn't provide pension and other financial security benefits, need a more comprehensive plan to work from.

Others, in very secure roles such as the public sector, just need a general outline of income and expenditure which they can refer to periodically, Kevin Johnson, chief executive officer of Cuda (Credit Union Development Association) said.

So set a budget based on how often you get paid and stick to it, he added. Do not underestimate the power of a good budget. Work out how much you have to spend. To do this, you need to calculate what's coming in, such as your salary or bonus. And work out what has to go out every week or month - mortgage repayments, loan repayments, utility costs, and grocery costs and other costs.

Once you have calculated your income and expenditure you will be able to see what discretionary amount you have left over and you can decide what's the best use for this. You might use some of it for socialising or your hobbies, but make sure you put some of it into savings which you can call on if you need it, Mr Johnson advises.

While a shopping splurge will give you some short-term instant gratification, savings will give you long-term peace of mind, Mr Johnson said.

You can retain your tracker mortgage when you buy a new home but you will have to stick to the same lender and transfer your tracker rate to your new mortgage.

Every household should have some sort of financial plan or budget in place. This is especially important for the self-employed and those with no occupational pension.

Irish Independent

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