Am I being screwed by AIB

M

Mrfrags

Guest
Can someone help me out here or give me there opinion on this!.

We are in the process of buying a house (Value 265,000) and have started looking for a mortgage of 150,000 over 15 years which would work out at 1000 approx a month. The rest of the money we have as savings/investments (€80,000) and the rest being gifted by both our parents. My wife stays at home and looks after the kids and my salary is approx 45K a year and my wife brings in about 400-600 a month approx through childrens allowance and her curtain making she does on the side.

We have approaced AIB for the simple reason they offered the best rate on their tracker rate (.95% above ECB rate) and also we know people working there. We were turned down initially because they said that We could afford the repayments and that I was not in permanent employment (Im on a 2 year rolling contract with state utility, nobody employed less that 4 years ago in permenant). I explained to them that we are well able to afford pay showing documentation that up until last month we had a car loan of over 750 a month (2 year loan) and on top of that we had rent of 750. The car loan is now finished, we do not have any credit cards, over drafts, etc. We spend only what we have (You become very responsible when you have kids LOL!).

Now my problem is that the bank has back offering us a mortgage over 25 years!... Is this a ploy by them to get more money out of me?. .... They have also asked me to come in and talk to one of their advisers about getting life assurance etc.

I have a gut feeling that I am being shafted here.. Should I go off and try and get a mortage with some else.. I just hate the way they try to make you feel they are doing you a favour by giving you a mortgage even though they will earn thousands off you...
 
Is there a reason that is stopping you from making additional lump sum payments which would bring the term down to 15 years?

I haven't got a mortgage, but we are thinking of a long-term (25 or 30 yrs) mortgage, and making additional payments in the first few years before any kids etc arrive. This would give us a comfort factor knowing that we had a bit of headroom if interest rates went up, but would also reduce the term of the mortgage.

I think the additional lump sums are suited to the tracker type mortgages, but maybe there is an additional "lump sum payment", or "administration" or "handling" charge on additional payments. From my experience, there are loads of people looking to sell mortgages, it would be worth your while checking with a broker who can compare different offerings from different lenders.
 
Why not shop around elsewhere rather than tieing yourself to one lender? The deal from AIB may look good but if they insist on a 25 year term when you may be able to afford a shorter one then it may not be such good value after all. Shop around. And this goes for life assurance etc. too - buying from the lender is convenient but you will generally pay a significant premium for this convenience.
 
a 25 year mortgage is a lot more profitable to the bank. you should take it now. you can always reduce the term or as bootdog aid , make additional contributions. afaik they cant make you take their insurance but iwould advise you to speak to their ins advisor if for no other reason than to not rock the boat. you can tell them then that you are going to shop around and when you get a better quote (you definitely will) you can tell them you are going with that instead and you are very sorry blah blah. if you are still not happy, maybe you could try whoever gave you the car loan.
 
a 25 year mortgage is a lot more profitable to the bank.

Yes - plug the different figures into this calculator to see the difference in cost between 20 and 25 years for example.

you should take it now.

I wouldn't necessarily agree. You should ideally start out with the shortest mortgage term possible even if you accelerate repayment later as well. Don't forget, the longer the initial term the higher the mortgage protection life assurance costs.
 
They probably had to extend the term to 25 years to make it fit their criteria which is based on the repayments not exceeding 35% of your net take home pay. As it's a variable rate product you can make regular or one-off overpayments without penalty to manually reduce the term.

Clubman - given that rates are likely to rise I normally recommend people not to tie themselves in to the shortest possible term as this could see them in trouble with higher payments. As above overpayments will reduce the term anyway.

Regards,

Sarah

www.rea.ie
 
Is interest always calculated on the sum borrowed or on the principle remaining!.
 
Clubman - given that rates are likely to rise I normally recommend people not to tie themselves in to the shortest possible term as this could see them in trouble with higher payments.

Fair enough - I should have qualified my comments with "where the borrower is not put to the pin of their collar in relation to financing the purhcase...".

Is interest always calculated on the sum borrowed or on the principle remaining!

The principal remaining - that's why with annuity/repayment mortgages you pay mostly interest and a little capital in the early years and eventually mostly capital and a little interest in later years. See how the calculator above displays the effect of such amortisation effects.
 
I know myself I can aford the repayments, I have proven to the banks that Im used to paying off a lot more per month. I have done my calculations and Id end up paying a fortune on extra costs and interest.

I believe I have to work hard enough for my money and Im not about to hard over my extra cash to the bank or anyone else for that matter!.
 
re:mortgage tem

MrFrags

I would be very slow to COMMIT myself to higher mortgage repayments than necessary especially if I was still on contact.

Personally, I would always avail of the longest mortgage term offered because it COMMITS me to a lower mortgage payment each month. For instance, we took out a 30year mortgage with AIB. We had children straightaway and we each took unpaid leave for a year. Fortunately, the lower 30year mortgage repayments we were COMMITTED to making each month at that stage made this possible. Now that we are both working again we are making extra monthly payments to reduce the term and will have repaid out mortgage in less than 12 years.

The only disadvantage to the above is that we had to take out life insurance for 30years, as opposed to 15years, but this extra life insurance is useful, as our family needs life insurance anyway.

Regards,
Ngirl
 
MrFrags,

AIB used the same tactic with me before when I was going for a mortgage.

My advice - shop around. Go to www.rea.ie and www.primafinance.ie and see what they can get for you.. I also think Bank of Ireland offer the same tracker rate of ECB + 0.95%?

Then go back to AIB and see what they say.

I wouldn't take the 25 year option if at all possible. As Clubman pointed out, use the calculator and you'll see.

Let us know how you get on with AIB.
 
150k mortgage on a 265k house is less than 60% of the house's value. Most banks should be very interested in you. Definitely shop around and tell them your required mortgage is than 60% LTV.
 
My advice to you would be:-

a) shop around

b) always negotiate the longest term you can (I know you'll think Bank will make more money on me that way, but see c) below)

c) after a couple of months, when you've moved in to your new home, and you've established what surplus cash you have availble, increase you payments accordingly, thereby reducing the term of the mortgage

d) no bank will refuse you (just be careful if you are on a fixed rate, you might run in to some problems, but unlikely)
 
I see no reason to get a shorter term mortgage. Get one for 25 years but pay the repayments amount that you would for a 15 year one. That way - you will pay it off in 15 years and it won't cost you extra, but as already said above, you will have the comfort of being able to drop the amount down each month if need be. I can't imagine that the life assurance cost difference is much - maybe someone can correct me on that? Get quotes for both 15 & 25 years and see how much it would be.
We are in the process of trading up and although there is about 27 years left on our existing mortgage, I am taking out one for 30 years but accelerating the payments.
 
Well took your advice and went into NIB. Once all documentation was provided my mortgage was sanctioned within 2 days. I found the staff really helpful and whats more I got a tracker mortgage of 2.79% (.79% above ECB rate) with free banking for the duration of my mortgage!. Savings of over €300 a year.. Pretty delighted with myself!.
 
"I see no reason to get a shorter term mortgage. Get one for 25 years but pay the repayments amount that you would for a 15 year one. That way - you will pay it off in 15 years and it won't cost you extra, but as already said above, you will have the comfort of being able to drop the amount down each month if need be. I can't imagine that the life assurance cost difference is much"

regarding the added cost of longer life assurance..
you'll probably want the life assurance for the added years anyway..
if you finish the mortgage payments early, you can then either
stop or continue the life assurance, keep the life assurance as a stand-alone policy not tied into any mortgage.
 
[font=&quot]I am getting a 37 year mortgage is that total madness?? I had though that over time the loan you get from the bank will not seem so expensive and in real terms it won’t. If you want you can pay off lump sums etc to make it smaller. Is my thinking flawed ?[/font]
 
nestor said:
I had though that over time the loan you get from the bank will not seem so expensive and in real terms it won’t.
Click to expand...


What do you mean? The longer the term the smaller the monthly repayments but the higher the overall interest costs if the mortgage runs full term.

 
[font=&quot]I meant that in 10 years time 5 Euro will not be worth what 5 euro is worth now so the mortgage will not seem so expensive in comparison to what it is now. Is that not generally accepted? [/font]
 
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