# How are we doing and where are we going?



## DiddleyBo (27 Oct 2017)

*Money Makeover*
Details:

Age:     *50*
Spouse’s/Partner's age:   *53*

Annual gross income from employment or profession:   *€98,000*
Annual gross income of spouse:   *€49,000*
Monthly take-home pay:   *€  7,650*

Monthly expenses: circa €5k


*Groceries etc     1,100*


*Mortgage 1     1,436*


*Mortgage 2     860*


*Gas and Electricity     150*


*Property Tax      54*


*School Fees x 2 (over 9 months) 1,000*


*Car Insurance x 2     95*


*Diesel      120*


*Holiday Fund        250*


*Phone, 3 mobiles, TV, Broadband    140*

Type of employment: *Both in* *private sector*

In general are you:
(a) spending more than you earn, or BREAKING EVEN. *We’re breaking even*
(b) saving? *We have a small savings pot– see below*

*Breaking even *

Rough estimate of value of home:   *€600k*
Amount outstanding on your mortgage:   *€217,000 (8 years left on it) rate is 3.37% which I haggled with EBS to get. It is split in 2 as one was the house purchase, the other the extension. One is €90k, the other €127k*

Other borrowings – car loans/personal loans etc.: *None, all paid off – see below.*


Do you pay off your full credit card balance each month? *Yes, always. *

Savings and investments: *About €7,600 in equities; Ryanair shares which have done v well over the years. Got badly burnt on AIB and Anglo shares in 2008. Plus we have about €16,000 in cash savings*

Do you have a pension scheme? *Yes, both in DC schemes. 11% employer and 5% personal for me. Can’t stretch to making AVCs yet. Current total value is €445,000. Partner pays 5% and employer matches with 5%. Pension fund amounts to circa €90,000 (note: includes 10 years preserved benefits in a bank DB scheme).*



Do you own any investment or other property?* A share in holiday home. 3 years left on 20 year mortgage. €160 per month mortgage cost. We don’t rent it out, too much like hassle. *

Ages of children: *18, 13*

Life insurance: *We both have policies that pays 4 x Salary on death. Both also have serious illness cover in place. Life cover for mortgages also in place. *

*Questions*

*We’re in Dublin and probably overstretched with the house we bought back in 2005 but are v happy where we live. We’ve pared every utility and other financial products and health insurance back to the bone. We shop sensibly and other than wine at home at the weekend and the few pints here and there don’t lead an extravagant lifestyle. We both need cars which are always bought second hand 3 – 4 years old which we keep for 2 – 3 years and then trade in . . . rinse and repeat. *

*We received a net inheritance of €50k last year which allowed us pay off debt, make some home improvements, fund a family holiday and pay lump sums for school fees for the boys to ease the monthly repayments*

*I will soon be receiving an inheritance as parents now deceased. Not sure how much as probate only underway since June and family home is now on the market. Fair Deal x 2 and other taxes will be due. If lucky, it will be circa €100,000 net.*

*Plan is to try and pay off one of the mortgages with that lump sum to free up some cash-flow for a) general living and b) some savings/AVCs. *

*Interested in views on how we are doing generally and what is the wisest way/best principles for managing the inheritance when it arrives. Eldest will hopefully go to college next year so that will need to be funded, though given the school fees we are currently paying we expect to be paying less.*

*Also both working full-time but would love to retire early, say 62 or 63 if work, health and the fates allow it. Neither will be eligible for state pension until age 68. *


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## so-crates (4 Jan 2018)

Overall you are doing well. You may have overstretched on the property a decade ago but you do not seem to have suffered any long term stress from that. Your mortgages are manageable. However, your savings are a probably little low and your pension pots are probably underfunded especially for an early retirement. You have a generous employer contribution on your pension so your best bet is to increase contributions there. 

I assume you are assuming that your 18 year old is planning on college in Dublin and living at home if you think you will see a reduction in his €1000pm education cost.


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## RedOnion (4 Jan 2018)

It's not a massive amount of savings, but you should switch lender for your mortgage.
AIB would only be 2.75% currently on <50% LTV. 
Even if you don't want to switch, you should fix one of the mortgages with EBS at 3.15%. leave the other variable if you hope to pay it off with inheritance.

You'll have mortgage fully cleared by 60, children should be both out of college.  It'd be worth focusing on your pensions a bit more if you want early retirement to get a reality, so look at that with a view to increasing contribution significantly once lump sum paid off Mortgage.


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## DiddleyBo (5 Jan 2018)

Thanks so-crates. 

Yes the hope is that third level will be here in Dublin which will make the costs that bit more manageable. We pay €500 pm for each of the kids for 9 months so we'd hope to save on a bit of that.  I had thought we were doing reasonably well on the pension front but I hope to be able to make AVCs once we've paid down one of the mortgage loans. I will have to convince my partner to do likewise. 

Thanks also RedOnion. I thought I was doing well with the rate I got from EBS and I wasn't aware AIB were offering a more competitive rate.That's good advice. I might look at fixing, I got mildly burned in the late '90s with a fixed rate when rates dropped but I can see the merit.  Plan would probably be to do this when the inheritance comes through so I can work out what's best to do. If I'm lucky with  the price we get for the family home the  inheritance will allow me clear the bigger of the two mortgages. If I'm not, I may clear the smaller one.

The decision I may have to make is should I clear the big mortgage and leave little left over or clear the smaller mortgage and have maybe €30k to put into savings. Clearing the bigger one will free up circa €1.450pm, the smaller one around €845pm. I'd welcome views on that


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## RedOnion (5 Jan 2018)

Personally I'd pay off the smaller Mortgage first. Psychologically, since you already see them as 2 mortgages, you're down to 1 Mortgage immediately.

Now, choices for the remainder.
1. You don't need any more savings unless you've planned expenditure in the next year or 2. Between current savings, shares, and assuming you've credit cards, you've already got access to 25k in an emergency.
2. Pay a lump sum off the other Mortgage. If I did this I'd look to reduce the term and keep repayments constant, so you'll be debt free sooner.
3. At you age, I'd be making a serious contribution to your pension. For a net cost of 20k you'd be putting about 38k into a pension. Back date it to last year to get the tax back immediately, and then start making regular AVC contributions from the money you're saving on reduced Mortgage payments. If you don't, there's a risk that your extra money each month will just get spent.


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## DiddleyBo (8 Jan 2018)

Thanks RedOnion. Your last sentence hits the nail entirely on the head for me. I really want to get our decision making around this right. It is probably going to be the biggest amount we will ever get in a lump sum in our lives.  My fear is that the extra money we end up with will just end up being spent and we will have nothing really to show for it. A further lump sum on the other mortgage might be worth doing too. I hadn't thought of that.

Re: pensions, yes we are now at an age where we can get a decent amount of tax relief in AVCs and that is definitely worth doing too. Backdating to last year makes sense.

Any other thoughts out there?


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## DiddleyBo (1 Mar 2018)

Thought to provide an update on this snowy day. The inheritance came through a little quicker than expected and so far I’ve done the following:

1. Paid off the smaller of the mortgages, €88k. This will free up €850 per month. Saved abut €15k in interest or thereabouts too as a result by my calculations. The psychological affect of this on us has been very positive. Makes us feel we’re getting there now. Less weight on our shoulders. Cancelled the life assurance for it too which is a further saving of €26 per month.

2. Have decided on a strict three month grace period during which a) we’ll live a little easier with that additional monthly cash flow and b) make firm decisions on the rest. This won’t drift but I think we have to live a little too.

3. Based on previous suggestions, I spoke to EBS about reducing my rate from 3.37% to something better. I made the better LTV argument. The best they would offer was the 3.15% fixed rate. However, it would only save us €12 per month. Going to hold off for 3 months (as per above) and if we decide to pay something off the main mortgage we will do that and then fix as we couldn’t if we fixed now.We will then either overpay monthly or put a lump against the debt (or possibly both) and try pay it down two years earlier which would leave us debt free by our mid-50s. Amounts to be determined, I’m still running the numbers and weighing up the implications.

4.I spoke to AIB about their 2.75% rate and switching. They ran the calculations and maintaining the 8 year mortgage term the saving would be only €34 per month. I was disappointed with that but the low rate and short term means mathematically the rate reduction does not have as significant an effect on the monthly repayments. It would apparently if the term was longer. So, we need to weigh up if it is worth doing so or staying with EBS. Even with the €2k they are currently offering switchers.

5. Paid off the holiday home mortgage which frees up €150 per month. Again, psychologically a great feeling.

6. Cleared the VISA bill (€1,300) which was all legitimate stuff but the credit cards are now put out of sight. Cash economy from here on in.

7, Will give each of the 2 kids €1k each as their “cut”. To do as they wish and also get something as a reminder of their grandparents. Nothing good in giving teenagers more that’s that, well for now anyway.

8. Have stuck the balance into a one week AIB demand savings account which we have at a pathetic interest rate. I know it’s not the smartest but are going to hold it there for this 3 month period - see point 2 above. About €54,000 is in there now. One week demand period keeps it away from temptation.

9. Plan is to focus on short, medium and long term financial plans.
Short term may be to salt €20k away in a rainy day fund
Medium term may be to invest €20k in equities
Long term may be to start making AVCs as previously advised

10. I’m going to change my car and probably put €6k towards that. I’ve a lot of mileage on mine and it is 6 years old. Would trade up to a three year old (so someone else is taking the main depreciation hit) and go with a UK import through a reliable guy I know who specialises in that market.

11. We will probably put 5k towards a family holiday at some point. You have to live too and the kids won’t want to go away with us for too much longer.

So, that’s the reality of what we’ve done and Mrs DiddleyBo and I will have a few discussions in the weeks ahead and plan. The extra €1k a month we have gives us options now. Though again a lot depends on our work, our health and what the future brings.

Current thinking is to put 1/3 of this monthly surplus we now have into overpaying the mortgage, 1/3 into AVCs and 1/3 into living a little. There seems to be something logical in my mind to doing it like that.

Would welcome all inputs and observations on this and the logic of what we’re doing and planning to do. Thanks a mill.

DiddleyBo


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## RedOnion (1 Mar 2018)

Great to see you're feeling the psychological effects of repaying the mortgage already.



DiddleyBo said:


> 4.I spoke to AIB about their 2.75% rate and switching. They ran the calculations and maintaining the 8 year mortgage term the saving would be only €34 per month. I was disappointed with that but the low rate and short term means mathematically the rate reduction does not have as significant an effect on the monthly repayments. It would apparently if the term was longer. So, we need to weigh up if it is worth doing so or staying with EBS. Even with the €2k they are currently offering switchers.


Just remember that's 34 euro every month, for 8 years (if rates stay the same).  That's over 3 grand!  The 2k from AIB will be more than enough to cover the cost of switching.



DiddleyBo said:


> the credit cards are now put out of sight. Cash economy from here on in.


I'm actually thinking of getting rid of my credit card completely.  I haven't used it since August as a test without problems - even managed to rent a car without one.
Just bear in mind that if you cancel it in March, you'll pay stamp duty for the last year, but if you keep it past the end of March you'll have to pay for next year as well!



DiddleyBo said:


> Will give each of the 2 kids €1k each as their “cut”. To do as they wish and also get something as a reminder of their grandparents.


That's a lovely idea.  And with that money, hopefully the Tattoo will be tasteful....   


Overall, I do think you're at the age you need to take the pensions a bit more seriously, especially if you want to retire in your early 60's.  I'd sit down and start working out how much you want to have, and what you need to get there, rather than looking at how much you want to put away each month.  There'll be a big difference between the 2, so you can start having discussions around that and thinking longer term about how you can achieve your goals.


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## goingforgold (1 Mar 2018)

I think we need to be clear and realistic here - you are v well off. You have a net worth of ~ 1million euro (inc. Pension) and are still relatively young. Now that you're in such an enviable position your focus now should be paying down remaining mortgage as soon as possible and maximising your AVC's. What is holiday home worth? Do you use it often? Maybe you could sell and pay down remaining mortgage on PPR even sooner?

Apart from that, I'd live a little like you suggested...doesn't need to be anything too mad but you are in a position where you are comfortable and can enjoy life...life is short afterall!


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## PGF2016 (1 Mar 2018)

RedOnion said:


> I'm actually thinking of getting rid of my credit card completely.  I haven't used it since August as a test without problems - even managed to rent a car without one.
> Just bear in mind that if you cancel it in March, you'll pay stamp duty for the last year, but if you keep it past the end of March you'll have to pay for next year as well!



I had no credit card until I started using one that gives cash back. Once you’re disciplined and never pay interest it can be worthwhile having one.


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## DiddleyBo (3 Mar 2018)

Thanks again all. Always interesting to get others’ viewpoints. Some very useful observations. BTW RedOnion I too hope the tattoo(s) will be tasteful too. 

Will enjoy the three month grace period and use the time come up with a plan. Will post again once we’ve an outline of what we intend to do. 

Cheers.


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## DiddleyBo (15 Apr 2018)

Thought to post up what we’re considering doing with the additional circa €1k per month we now have as a result of the inheritence received. We’ve been enjoying the _grace period _this last while. 

What works in our heads is to have three directions for putting the cash to work. The likely plan is to put approximately one third towards our pensions, one third to the mortgage and one third to live a bit easier on. 

1. Pension - We’ll probably stick €400 gross a month into AVCs which with the tax relief should cost around half that in net salary. Will review as we go along.
2. Mortgage - putting €333 a month into the building society account to go towards overpaying the mortgage. Every three months that means we overpay by €1k which will obviously get us toward being mortgage free sooner. 
3. General living - Using the rest to enjoy life a little more. 

Students of maths will note the AVC isn’t exactly one third (net with the tax relief) but we want to get comfortable doing this and may bump the amount up so it gets closer to €333 net a month. 

It all seems to be a bit complicated and old-school with EBS doing the mortgage overpayment. They suggest i write a letter explaining the overpayment each time and have both our signatures on it. Anyway, its fine as the branch isn’t too far away so it is not a major inconvenience to go in every three months. Still looking at rates and the switching option. If we fix at the lower rate with EBS it means we wont be able to overpay. Other option is to fix down to 3.15% for a year, bag the savings and put the  €4k that will build up against the mortgage when it expires. Need to decide on that. 

The “general living” element may be higher than many posters here would advise and we need to make sure it doesn’t become a new “target”. We’ll keep an eye on so things don’t get out of hand.

So, thats the short term decisions almost made. I still plan on changing the car as well. 

When all of this closes out we will probably end up having circa €75k in our savings. Interest rates are obviously a pittance and inflation will erode that over time. That figure well covers what should be in any emergency fund. I’d be interested in thoughts as to what to do with it. I’m minded towards putting maybe €25-€30k into a number of shares. Ryanair have been good to us over the years. We also have a capital loss of circa €18k as a legacy of bank shares which tanked. It may give us an option to use that up as well as (hopefully) being a good medium to long term investment of the money. I’m less risk averse than my partner who is understandably cautious given the losses we incurred on bank shares 10 years ago.  Putting it into AVCs is another option suggested earlier and the tax relief makes you nearly double your money from the outset. The downside is the money is inaccessable until I retire which is 10-15 years away. 

Again, all of this also depends on our health and what the fates deal us...


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## DeeKie (15 Apr 2018)

PGF2016 said:


> I had no credit card until I started using one that gives cash back. Once you’re disciplined and never pay interest it can be worthwhile having one.


What one is that?


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## stantheman (15 Apr 2018)

DeeKie said:


> What one is that?


AIB Visa Platinum gives a small percentage of cash back - around 0.5% from memory.


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## RedOnion (15 Apr 2018)

DiddleyBo said:


> It all seems to be a bit complicated and old-school with EBS doing the mortgage overpayment.


Yes, their systems / processes don't seem fantastic. However, there is a form you can fill in to have an increase in monthly repayment until you ask them to stop. Ask what your options are - if you have to go to any trouble there's a chance you'll give up.


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## PGF2016 (15 Apr 2018)

DeeKie said:


> What one is that?


KBC cash reward card. 1% back from online or grocery purchases up to €10 per month or €120 per year. 

Since that post I watched a Youtube talk by Frank Abignale of the "Catch me if you can" film fame. He says you should always use credit cards. Using a debit card risks your own money.


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## DiddleyBo (27 Apr 2018)

Brief update. Did the first overpayment on the mortgage today with the EBS. Woo-hooo. A €1k lump sum off the principle.

Inquired about the fixed rate at 3.15% for one year. Would save a few €uro monthly but it appears i would lose my “discount rate” of 3.37% (which i haggled for big-time) at the end of the fixed term and go on to the standard variable rate. So might be worse off.
Traps, traps, traps.

Advice at the counter too was to reduce the term as opposed to reducing the monthly repayment. That runs counter to advice posted previously by Brendan and others so if its not too much trouble to ask....should you reduce the term or the monthly repayment?

As i understamd it, mathematically there is precious little difference between either approach. The key advantage to reducing the monthly amount appears to be the flexibility it will give you if a financial shock occurs.

Discuss . . . . .


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## DeeKie (28 Apr 2018)

Reduce the term if you’re able to make the payments comfortably? I’d be interested in that too.


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## RedOnion (28 Apr 2018)

Hi @DiddleyBo 

Great to hear things are progressing. No update on the tattoos though? 

What's your current total mortgage balance? Am I right in saying it's 126k in a house worth 600k? With about 8 years left? 

Since your original post, UB have changed the criteria for their 4 year fixed rate. 2.6%, and you can overpay up to 10% of the balance each year. I know the monthly savings aren't huge because of the small balance, but you really should switch.


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## DiddleyBo (28 Apr 2018)

Thanks DeeKie.

No tattoos yet RedOnion. One has been scouting for but not taken the plunge yet. Hoping he chickens out !

I checked the effect of a 2.6% rate and it would appear to save us around €70 per month. That’s on a loan of €119k (remaining now) and a house valued around €600k. 7 years 8 months left to go on it now. I like the flexibility re still being allowed to make overpayments. On top of the €333 per month we’re setting aside to overpay we’re also considering making a lump sum of circa €15-€20k too once we are clear on our final position.  Do you know if they contribute toward the legal and other costs of changing, estimated around €1,300 - €1,500 or so? If they did there’s a strong argument to move to UB. 

In saying that does anyone have a sense of the direction EBSs rates are headed as knowing my luck the moment I’d moved theirs would reduce.  

Thanks for all the comments.


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## RedOnion (28 Apr 2018)

DiddleyBo said:


> Do you know if they contribute toward the legal and other costs of changing


Yes, they make a flat payment of 1,500.

Don't forget to review your mortgage protection as well. You're probably over covered after paying off lump sum.

We've been speculating about an AIB / EBS rate cut for a while, but it just hasn't materialised. They've grown their market share this year, so might be no driver to push rates down further. In ant case, switching will take you a few months, so if the rate drops before then you can just cancel.


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## garbanzo (20 Jun 2018)

RedOnion said:


> Personally I'd pay off the smaller Mortgage first. Psychologically, since you already see them as 2 mortgages, you're down to 1 Mortgage immediately.
> 
> Now, choices for the remainder.
> 1. You don't need any more savings unless you've planned expenditure in the next year or 2. Between current savings, shares, and assuming you've credit cards, you've already got access to 25k in an emergency.
> ...


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## RedOnion (20 Jun 2018)

@garbanzo
I must have had fat fingers that day (or my head was in a self employed space).

Say a net cost of 20k. For a 40% tax payer, the 20k is the 60% that's left. So 20k/60% = 33.3k pension contribution.

Does that make sense?


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## MrEarl (21 Jun 2018)

DiddleyBo said:


> ....
> 
> I checked the effect of a 2.6% rate and it would appear to save us around €70 per month. That’s on a loan of €119k (remaining now) and a house valued around €600k. 7 years 8 months left to go on it now. I like the flexibility re still being allowed to make overpayments. On top of the €333 per month we’re setting aside to overpay we’re also considering making a lump sum of circa €15-€20k too once we are clear on our final position.  Do you know if they contribute toward the legal and other costs of changing, estimated around €1,300 - €1,500 or so? If they did there’s a strong argument to move to UB.
> 
> ...



Hello DiddleyBo,

See  here for details of Ulster Bank's contribution towards mortgage costs.  I see the offer only runs until the end of June, but I would not be surprised see them push back that date.  If you act quickly, perhaps get them to agree to pay it regardless, even if your refinance runs into July.

With due respect, you seem overly loyal to the EBS and I don't understand why.  The rate you negotiated might have once been great, but it's not anymore and given the relatively short period remaining on your Homeloan, it's unlikely to ever be of value to you again.  You need to leave the EBS, to get a better deal elsewhere.  Every month that you remain with them, hoping that they might drop rates, you are paying over the odds.  Even if they do reduce their rates in the future, odds are they will not undercut the market leader, and they won't compensate you for the additional interest you've paid up until that point in time.

If you take the €70pm saved on mortgage repayments post refinance and put it into your pension as a regular AVC, it adds about €100 pm to your retirement fund.  Assuming rates, tax relief on pension contributions etc. remain equal, that would add about €8,500 to your retirement fund over the next 7-years if we assume no growth, with zero hardship for you.

You refer to wanting to try and retire a few years ahead of expected retirement age, well if your are serious then the above is a small and simple step in the right direction (albeit you also need to be taking other steps to grow your retirement fund).


.


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## DiddleyBo (4 Jul 2018)

Hey Mr Earl, thanks for the straight feedback. You are probably right in terms of me being “overly loyal” to EBS. I’ve been with them for various mortgages since 1996 and there is probably an element of sentiment in where I’m coming from. That should have little bearing on cold financial decisions when it comes to simple products like mortgages

Looking at the UB rates though, the variable rates look to be pretty high once the fixed rates run out. It is quoting an SVR of 4.3%APR which is nearly 1% above my current EBS variable rate of 3.37%. Probably best to give them a a call when I can get a spare minute from work and establish the facts. 

My solicitor has quoted me €1,300 to do the legal side so I’d be €200 ahead there for starters.

Cheers.


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## DiddleyBo (11 Jul 2018)

Updating that I contacted UB today re this. They ran the numbers and I would be worse off by around €200 per month by moving to them!!!

While they are quoting headline rates of 2.3% and 2.4% for fixed terms it appears the APR is around the 3.9% mark. That’s a bit more than the 3.37% I currently have with EBS. It may make sense to select a lower fixed term rate from EBS as I appear to be comparing like for like. BUT....I was advised by EBS that if I come off that “special rate” I haggled for I would have to go back to their higher SVR. 

They don’t make this stuff easy do they !


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## RedOnion (11 Jul 2018)

Hi @DiddleyBo
A bit of a weakness with how APR is quoted is the bank has to assume you go to their variable rate when the fixed rate ends, for remaining term of mortgage. Personally I think it's a bit meaningless for something that's designed to make things more transparent.

It doesn't make sense that you'd be worse off moving to UB, unless of course you end up on their SVR afterwards. Who calculated it would be 200 per month more? The rate would need to be 2% higher on your mortgage balance, unless you got quoted for a shorter term?

The negotiated rate you currently have with EBS, is it guaranteed to always be below their standard rates if you do nothing?


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## DiddleyBo (11 Jul 2018)

My thoughts too @RedOnion. I was v surprised. The UB agent who calculated it couldn’t explain it really. 

Yes, the rate I negotiated with EBS has always maintained the the same circa 0.4% differential as rates moved. 

An explanation may be in the fact that I have 6 of the 20 years remaining on the mortgage. The shorter period may have something to do with it given the interest element reduces gradually and after 14 Years of payments im chipping away more at the capital now.


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## RedOnion (11 Jul 2018)

@DiddleyBo 

119k, at 3.37% over 6 years. Your repayment should be about 1,827? If it's less than this, you must have more than 6 full years remaining.

At 2.3% it's 1,592 (135 per month less).


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## MrEarl (14 Jul 2018)

DiddleyBo said:


> ....BUT....I was advised by EBS that if I come off that “special rate” I haggled for I would have to go back to their higher SVR. ....



I think you need to get to the bottom of this "special rate" once and for all ....

You need to get an explanation of exactly what they have given you in writing, is it a price promise that the lending rate will never be more than X over ECB, or a guaranteed margin over ECB, or something else and is it for the life of the loan.

Without the above, it could well be a load of bull they just rattle off from time to time, or some form of discount that they can withdraw at will in the future (an important point to keep in mind !).

As for the UB experience, I agree with Red Onion.  Lets not forget, you are asking someone to compare current SVR's in respect of a future period in time (i.e. post the 2 year fixed interest rate period for example), so how can anyone know what the various Banks will be charging for their SVRs, in order to provide an accurate comparison ?


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