To fix or not to fix...

J

jim

Registered User
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Hi,

I know there are a number of threads that have covered this topic in some detail but can I please outline my situation and ask for some feedback.

I am deliberating at the moment over whether to fix with kbc or stay on VR.

Normally i Would be inclined to fix for maybe 3 yrs however i am planning on selling the property in 1-2 years.

O/s bal is €174k 27 yrs and value is approx €270k so ltv of 60-70%.

The new customer ltv rates in kbc With current acount discount (cant currently move bank) are:

Vr - 3.1% approx €795pm
Fix 1yr 2.9% €770pm
Fix 3yr 2.99% €789pm

So fixing for 1 yr has best monthly cost.

But if i need to break are the fees typically a lot? Also after the fixed period if i wanted to fix again or go for a better VR wouldnt i have to revalue property again? If break fee isnt typically much and if id have to revalue again after 1 yr fixed expires should i just fix for 3 yrs as its a decent rate?

I personally dont envisage rates increasing (much) in the next 1 or 2 yrs and potentially i see them reducing a bit more.

Its not really obvious to me which option i should take and any advice is much appreciated.

Jim
 
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Is a difference of 19-25 euro a month worth the hassle if you want to sell within the next 2 years anyways?
It will costs you max. 600 Euro (24 months * 25 Euro) if you stick with the SVR of 3.1% over the Fix 1yr rate, but allows for full flexibility.

I'd probably fix for 1 year unless you have already put the property on the market. It will take 3-6 months in any case from putting it on the market until the deal closes, so not very likely that you sell it beforehand. And even then, the breakage fee would be very small.
 
Hi newirishman, just to clarify, I am currently on the prevailing existing customer vr in kbc of (i think) 3.5%. I am trying to decide which of the above ltv new customer options I should take after I get property revalued. I will be saving a significant amount over a year by taking any of these options.

I'm uncertain re if/when i will sell but my intention at the moment is to sell in 1-2 yrs time.

I wont need to the flexibility for the next 12 months as i wont be overpaying and prob wont be selling within 12 months.

Thats good to hear re the breakage fee. I am leaning towards fixing (question is for how long) because:

a) I dont need the flexibility in yr 1 but prob will need it in yr 2.
b) its a better rate than the vr.

If I fix for 1 yr, which is a good rate (2.9%), do I then need to have the house revalued again in 1 yr in order to potentially fix again or to go onto the appropriate ltv VR? If I do have to pay for another valuation then I might as well fix for 2 yrs (2.99%) and suffer the potential small break fee if I sell....hard to know....

Thanks.
 
jim said:
Hi newirishman, just to clarify, I am currently on the prevailing existing customer vr in kbc of (i think) 3.5%. I am trying to decide which of the above ltv new customer options I should take after I get property revalued. I will be saving a significant amount over a year by taking any of these options.

I'm uncertain re if/when i will sell but my intention at the moment is to sell in 1-2 yrs time.

I wont need to the flexibility for the next 12 months as i wont be overpaying and prob wont be selling within 12 months.

Thats good to hear re the breakage fee. I am leaning towards fixing (question is for how long) because:

a) I dont need the flexibility in yr 1 but prob will need it in yr 2.
b) its a better rate than the vr.

If I fix for 1 yr, which is a good rate (2.9%), do I then need to have the house revalued again in 1 yr in order to potentially fix again or to go onto the appropriate ltv VR? If I do have to pay for another valuation then I might as well fix for 2 yrs (2.99%) and suffer the potential small break fee if I sell....hard to know....

Thanks.
Click to expand...
Why not move to BOI and fix for 1 or 2 yr @ 3% and get 2% cashback?
 
renter45 said:
Why not move to BOI and fix for 1 or 2 yr @ 3% and get 2% cashback?
Click to expand...

You'd be talking about 3500 euro cashback, with at least half of it will be spend on the paperwork and solicitors fees. Plus getting all the paperwork together. Really worth the hassle?
 
I would switch bank in a heartbeat to avail of cashback and better rate but currently cannot due to my circumstamces. I generally dont see the switch process as been hassle, id be quite happy to do it.

If i fixed for 5 yrs at 3.05% what would be the likely break fee if i sold with 3 yrs left on the fixed? Or how do I calculate it? If it was fairly immaterial i would prob just lock in the 3.05%.
 
jim said:
If i fixed for 5 yrs at 3.05% what would be the likely break fee if i sold with 3 yrs left on the fixed? Or how do I calculate it?
Click to expand...
Hi,
The break fee is a function of the banks cost of funds. If rates rise and the 3 year rate in 2 years time is more than the 5 year rate now, you'd have no break fee.

Personally, I'd fix for with 1 or 3 years in your circumstances.
 
newirishman said:
You'd be talking about 3500 euro cashback, with at least half of it will be spend on the paperwork and solicitors fees. Plus getting all the paperwork together. Really worth the hassle?
Click to expand...

OK the Op can't switch. But to answer your question. If legal fees did take half (total fees in my case were €1200) you're looking at €1750 tax free for about 8 hours work (max) all in, admittedly spread over a month. I don't know how much you get paid but it'd be worth it to me.
That's without taking into account the savings of going to the lower rate.
 
qwerty5 said:
OK the Op can't switch. But to answer your question. If legal fees did take half (total fees in my case were €1200) you're looking at €1750 tax free for about 8 hours work (max) all in, admittedly spread over a month. I don't know how much you get paid but it'd be worth it to me.
That's without taking into account the savings of going to the lower rate.
Click to expand...

Same as that. And id hardly
Call it “work”. Its a bit if research and a couple of emails/calls. Its a no brainer for those that can.
 
Soi think my questions to KBC should be the following:

q1. If i fix for 5 yrs what will be the break fee if i break after 1 yr, as an example? I know there is a formula on this but just looking for a ball park figure i.e is it 100s or 1000s.

q2. If i fix what rate do I revrt to after the expiry of the fixed period? If it is the prevailing vr and not the ltv vr then i would need to get another valuation which is €130, in irder to get the ltv rates which is a pain.

Decision:

If i go for the ltv vr of 3.1% ok i pay an extra €300 per annum versus the 1 yr fixed rate of 2.9% but i dont suffer a break fee if i want to move bank or sell — see q1.

In all liklihood if i dont sell i will prob want to move bank in a yr or so for cashback/better rate so the vr makes sense even though its an extra €300pa - again subject to answer to q1.

But if the break fee was significantly less than €300 then i might aswell fix for 3 or 5 years.

I cant switch to another bank for at least 6 months and so i might aswell fix for at least 1 yr. The downside of this though is - if i fix for just 1 yr, and id need to clarify this with kbc, is what rate do i revert to - see q2.
 
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