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The need-to-know about mortgages and securing your forever home

Much has been made in the media lately about the meteoric rise in house prices throughout Ireland.

If you have been thinking about buying a home, now is the ideal time to act before prices go up even further.

With housing prices up by 5.55% across Ireland in the year to May, the increase was the fastest in two-and-a-half years.

And according to a recent Residential Property Price Survey from The Society of Chartered Surveyors Ireland (SCSI)/Central Bank of Ireland of Irish estate agents, it doesn’t end there; respondents predicted property prices to rise by as much as 7% in the next twelve months.

With interest rates remaining competitive, a range of options for fixed and variable rates and a number of new lenders coming to the market, home buyers have never been in a better position to shop around for a mortgage that suits their circumstances.

Fixed rates, long-term lock-ins, green packages: what is right for you?

With many new borrowers keen for financial certainty, the Central Bank has reported that fixed rate options are by far the most popular choice, making up almost 80% of all new mortgages taken in Ireland.

Fixed rates are ideal for people who want budgeting security and provide absolute clarity around their monthly repayment costs for the term of their fixed rate. If interest rates go up, fixed rate mortgage holders can rest assured with the security in knowing their monthly repayments will stay the same.

The popularity of locking in fixed rates for a longer term is also gaining pace, with Finance Ireland and Avant Money both recently announcing they would introduce long term fixed rates for their customers, at 20 and 30 years respectively.

Both offers are contingent on the customer having a loan to value is less than 60%, in which case Finance Ireland’s 20-year rate at 2.6%, and Avant Money’s 30-year rate at 2.85% look pretty good.

Another interesting advantage of the long-term fixed rate is that if your mortgage is sold on to a vulture fund, your rate remains the same for the fixed term, giving you peace-of-mind that your financial goals can remain on track.

And it’s not just new customers who can benefit from low, fixed interest rates: mortgage switchers can take advantage of a range of offers too.

Lender Haven recently announced a new 2.15% four-year fixed rate for new and existing customers and is not conditional upon a loan-to-value ratio.

This is a boon for buyers and switchers who would have traditionally needed a significant lump sum deposit, or sufficient equity in their own home to meet the interest rate criteria.

Instead, Haven’s low interest rate is conditional upon a new build’s Building Energy Rating (BER). Home upgrades may also tap into the rate offer if their retrofit achieves certain BER standards.

In addition to an estimated saving of approximately €1,800 over the course of a 25-year mortgage of €300,000, Haven will also pay €2,000 towards legal costs for eligible mortgage switchers can also benefit under its ‘Green Four Year Fixed Rate’ offer.

Fixed rates however won’t suit everyone; the likelihood is that your repayments will be higher than if you took a variable rate (at least in the beginning), while short term fixed rates will also have higher repayments than a longer term fixed rate product.

If you committed to a long-term fixed interest rate, you may also find yourself paying more if variable rates fall. Penalties for breaking your mortgage contract early can also be costly for fixed rate mortgage holders.

Weighing up the pros and cons against your own financial goals, and how comfortable you are with risk, is part of deciding which mortgage is best for you.

A word of caution about your mortgage commitment

One of the most important aspects of taking out a mortgage is to ensure you thoroughly understand your commitment to your lender for the term of your loan.

According to the Central Bank of Ireland, 1 in 8 mortgages are in distress, or near 29,500 cases of long-term arrears for home mortgages, meaning that at the end of the mortgage term, not all repayments will have been made.

The cases include accounts that are currently in arrears, those without full monthly capital and interest payments for the last 12 months under an existing alternative repayment arrangement, and those where the mortgage accounts are considered in default or non-performing under international accounting standards.

Taking the time to understand exactly what your repayment requirements are, and ensuring that you have a financial plan to meet them, will not only help protect you from falling into mortgage arrears in the future, but give you the confidence to know your financial and lifestyle goals are on track.

Now more than ever, advice about the right mortgage is crucial

There is a variety of different mortgage offers on the market right now and while the headline offer may jump out at you, it may not always be the one best suited to your needs.

It is important to speak to an advisor that can take your entire financial picture into account, and help you select a mortgage product that suits the vision you have for your lifestyle and financial future.

The Hennelly Finance team has more than 20 years’ experience providing clients in the west with personal financial advice tailored to their specific circumstances and helping them find a mortgage that meets their needs.

If you are in the market for a new home or are thinking of switching, why not arrange a personal mortgage consultation with an expert from our team?

Our QFA/CFP qualified financial advisors can provide insightful advice for single or joint applications as follows:

  • a comprehensive analysis of your current financial situation, and your lifestyle and financial goals
  • identifying the ideal mortgage product and lender to suit your needs
  • developing a plan to get your finances in order, ready for your application
  • coordinating the internal mortgage underwriting
  • submitting your application to the lender.

For just €250.00 you can achieve total peace-of-mind that you have found the right mortgage for your needs. We’ll even relieve you of the burden of the paperwork and liaise directly with the lender on your behalf.

Talk to our expert financial team for more information and to bring your home ownership goals one step closer. Call us today on 091 670 123 or email us at info@hennellyfinance.ie.