Brendan Burgess
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Your guide to trading up on a tracker mortgage
AIB to allow trackers to be ported to a new home
Analysis of new ptsb tracker mover product
Ulster Bank changes terms for people who want to port their tracker to a new home
Bank of Ireland/ICS now allow you to move and keep your tracker
AIB and permanent tsb have recently announced products which allows people with tracker mortgages to move home and keep their tracker, although with an increased interest rate. This raises a number of interesting issues for their borrowers.
permanent tsb details the terms and conditions in a 46 page brochure and these are used to illustrate the examples given here. It is assumed that the AIB product have similar terms.
I am in mortgage arrears – what do these new products do for me?
Nothing. The tracker portability products exclude borrowers who have been in arrears or who have rescheduled their mortgages in recent years. The lenders have other products aimed at struggling borrowers, such as split mortgages and term extensions.
I am in positive equity and want to trade up – how do these products work?
Let’s say you have a house worth €300k and a mortgage of €200k which is on a tracker interest rate of 1% (ECB + 0.75%). You want to buy a house for €400k.
If you have the salary to justify it, your lender will lend you an additional €100k at their new business rate. You can transfer the €200k tracker. The rate on this will increase to 2% (ECB + 1.75%) while the term remains the same. Your repayments will rise from €900 a month at present to around €1,600 a month in total for the new mortgage.
I am in negative equity and want to trade up – how will it work for me?
Let’s say you have a house worth €200k and a mortgage of €300k which is on a tracker interest rate of 1% (ECB + 0.75%). You want to buy a house for €300k.
As you are in negative equity, you will need to have €30k cash as a deposit.
The bank will transfer the tracker mortgage of €300k and increase the rate to 2% (ECB + 1.75%). They will give you a new mortgage of €70k at a variable rate of 5.1% - the rate they charge on mortgages over 90% Loan to Value. You will have a total mortgage of €370k on a house worth €300k.
Your repayments will go up from €1,400 a month at present to around €2,000 a month in total. If you have sufficient earnings to meet these repayments, you will be approved for the new mortgage.
While our house is a bit small for our needs, we could wait a year or two before trading up. Should we trade up now or wait a year or two?
The repayments on a tracker of €300k are only €1,400 a month and €1,150 of this is repayment of capital. So not only are your total repayments very low, but you are also paying down the mortgage much more quickly that you would be on a larger mortgage at a higher interest rate. So the longer you stay in your house, the more you save.
If you expect house prices in your area to fall or to remain at the current levels, you would be better off waiting. If you expect house prices to rise, the money you save by delaying the trade-up could be wiped out by the increased cost of your new house.
There are two other factors which might encourage you to trade up now if you can.
Firstly, your lender may withdraw the product or make it less generous.(Ulster Bank has already made its tracker mover less generous since they first introduced it).
Secondly, if your personal circumstances change, you may no longer meet the lending criteria e.g. if you move jobs, you won’t get a mortgage until you are two years with your new employer. (Update 21 March. You will not have to wait two years to get a mortgage, but you probably will have to wait at least 6 months and your employer will have to confirm that your position is permanent and that your probation is finished.)
We don’t qualify for this at the moment but we might qualify in a year or two. What can we do in the meantime?
This product is not available to anyone who has been in arrears or who has had their mortgage rescheduled in recent years, so make sure to pay your mortgage in full and on time.
Many people have taken advantage of low interest rates to overpay their mortgage. This is a huge mistake. Do not overpay your mortgage. If you are in negative equity you will need 10% of the purchase price of the new house. If you have positive equity and you overpay your mortgage, you will be borrowing this money back at the new business rate.
If you are thinking of renting out your current home and renting elsewhere, don’t. This product only applies to the family home.
If you are thinking of changing jobs, bear in mind that it might reduce your chances of getting a mortgage.
Terms and conditions of permanent tsb mover tracker
Brendan Burgess is the founder of the consumer website askaboutmoney.com
Your guide to trading up on a tracker mortgage
AIB to allow trackers to be ported to a new home
Analysis of new ptsb tracker mover product
Ulster Bank changes terms for people who want to port their tracker to a new home
Bank of Ireland/ICS now allow you to move and keep your tracker
AIB and permanent tsb have recently announced products which allows people with tracker mortgages to move home and keep their tracker, although with an increased interest rate. This raises a number of interesting issues for their borrowers.
permanent tsb details the terms and conditions in a 46 page brochure and these are used to illustrate the examples given here. It is assumed that the AIB product have similar terms.
I am in mortgage arrears – what do these new products do for me?
Nothing. The tracker portability products exclude borrowers who have been in arrears or who have rescheduled their mortgages in recent years. The lenders have other products aimed at struggling borrowers, such as split mortgages and term extensions.
I am in positive equity and want to trade up – how do these products work?
Let’s say you have a house worth €300k and a mortgage of €200k which is on a tracker interest rate of 1% (ECB + 0.75%). You want to buy a house for €400k.
If you have the salary to justify it, your lender will lend you an additional €100k at their new business rate. You can transfer the €200k tracker. The rate on this will increase to 2% (ECB + 1.75%) while the term remains the same. Your repayments will rise from €900 a month at present to around €1,600 a month in total for the new mortgage.
I am in negative equity and want to trade up – how will it work for me?
Let’s say you have a house worth €200k and a mortgage of €300k which is on a tracker interest rate of 1% (ECB + 0.75%). You want to buy a house for €300k.
As you are in negative equity, you will need to have €30k cash as a deposit.
The bank will transfer the tracker mortgage of €300k and increase the rate to 2% (ECB + 1.75%). They will give you a new mortgage of €70k at a variable rate of 5.1% - the rate they charge on mortgages over 90% Loan to Value. You will have a total mortgage of €370k on a house worth €300k.
Your repayments will go up from €1,400 a month at present to around €2,000 a month in total. If you have sufficient earnings to meet these repayments, you will be approved for the new mortgage.
While our house is a bit small for our needs, we could wait a year or two before trading up. Should we trade up now or wait a year or two?
The repayments on a tracker of €300k are only €1,400 a month and €1,150 of this is repayment of capital. So not only are your total repayments very low, but you are also paying down the mortgage much more quickly that you would be on a larger mortgage at a higher interest rate. So the longer you stay in your house, the more you save.
If you expect house prices in your area to fall or to remain at the current levels, you would be better off waiting. If you expect house prices to rise, the money you save by delaying the trade-up could be wiped out by the increased cost of your new house.
There are two other factors which might encourage you to trade up now if you can.
Firstly, your lender may withdraw the product or make it less generous.(Ulster Bank has already made its tracker mover less generous since they first introduced it).
Secondly, if your personal circumstances change, you may no longer meet the lending criteria e.g. if you move jobs, you won’t get a mortgage until you are two years with your new employer. (Update 21 March. You will not have to wait two years to get a mortgage, but you probably will have to wait at least 6 months and your employer will have to confirm that your position is permanent and that your probation is finished.)
We don’t qualify for this at the moment but we might qualify in a year or two. What can we do in the meantime?
This product is not available to anyone who has been in arrears or who has had their mortgage rescheduled in recent years, so make sure to pay your mortgage in full and on time.
Many people have taken advantage of low interest rates to overpay their mortgage. This is a huge mistake. Do not overpay your mortgage. If you are in negative equity you will need 10% of the purchase price of the new house. If you have positive equity and you overpay your mortgage, you will be borrowing this money back at the new business rate.
If you are thinking of renting out your current home and renting elsewhere, don’t. This product only applies to the family home.
If you are thinking of changing jobs, bear in mind that it might reduce your chances of getting a mortgage.
Terms and conditions of permanent tsb mover tracker
- Applies to family home only
- You must have 10% of the purchase price of the new property, but this can come from the positive equity in your existing home.
- You transfer the full existing mortgage to the new property but the rate is increased by 1%
- The term remains the same for the existing tracker although the term for the additional mortgage may be longer
- If you need an additional mortgage, it will be at the new business variable rates
- You must buy the new property within 6 months of selling your existing property
Brendan Burgess is the founder of the consumer website askaboutmoney.com