Avant Money launches a new mortgage today from < 2%

jim

Frequent Poster
Messages
555
O/s mortg of 170k with aib 2.9% 27 yrs left. 700 per mnth. Ltv 50%.

Option 1: go to avant at 1.95% mnthly repayment 650. Solic fee 1500, valuer 180. So woukd take three - ish yrs to recoup outlay.

Option 2: go to kbc at 2.4% (approx?). Collect 3k cashback minus 1680 is 1320 net. Repayments down to 675ish.

Allowing for some innacuracies in my figures which im open to correction on, option 2 seems much better.

Avant allow overpay on fixed rate of just 1% which isnt good either.
 

Brendan Burgess

Founder
Messages
41,451
Allowing for some innacuracies in my figures
This really is simple. You don't need a mortgage calculator.

I don't know how often we have to say it. Ignore repayments and just look at the interest rate.

AIB rate: 2.9%
Avant 1.95%
Difference: 1%

Savings per year €170k @1% = €1,700

which is your savings in the first year.
Brendan
 

pcowan

New Member
Messages
2
Thanks everyone - new here but found this site really useful before I called my broker today. Here are my details:

260,000 left on the mortgage for 25 more years at 80% LTV. House is in Kildare town. Paying 1206 per month to BOI at rate of 2.8% - fixed rate about to finish. Broker told me it was a no brainer to switch. No fee to broker and about 1000 legal cost. But then I get a Avant money 3 or 5 year fixed at 2.20% or a 7 year at 2.40%. My repayments drop to 1128 per month (-78 every month) or a saving of 45,000 over the life of my mortgage.

Broker also says Avant Money will do Kildare no problem. And says they have a 1% overpayment amount - but it is on the original mortgage - so for me that is up to 2,600 every year without a penalty. Should be loads for me.

What do you think - seems a good deal to me. Spend 1000 now and save 45,000 over time. The 1000 is repaid in the savings of the first year. Broker says it takes about 2 or 3 months and they do the work for me.

Any advice before I press the yes button on this? I am thinking the 5 year rate is best for me.
 
Last edited:

Brendan Burgess

Founder
Messages
41,451
What do you think - seems a good deal to me.
I don't know where to start. There are so many flaws in your thinking.

So I created a Key Post to show how to do it correctly.

 

pcowan

New Member
Messages
2
Wow Brendan - thank you for your Key Post. The advice is helpful. So I now calculate that I can save 2.8%-2.2% = 0.6% x 5 years x 260,000 = €7,800 Take away the €1000 fee and I still make €6,800 savings in the next five years - over a grand a year. Nice money for doing very little - and much better in my pocket than BOI.

And then, from your other posts, if I don't do anything I am better with a lender like Avant or AIB who are rate leaders and are more likely to have the best variable if I don't or can't switch. That could be a large savings but I hear your advice not to count that too quickly in case my circumstances change.

Hopefully I have understood - and thank you for your guidance here.
 

Brendan Burgess

Founder
Messages
41,451
Hi p

Spot on.

And yes, review it after 5 years.

Or if interest rates fall in the meantime, it's worth reviewing it again to see if it's worth paying a break fee to switch to a different rate with Avant or to a different lender.

Brendan
 

Sarenco

Frequent Poster
Messages
6,345
So I now calculate that I can save 2.8%-2.2% = 0.6% x 5 years x 260,000 = €7,800
The interest saving would actually be slightly less than that because you would continue to pay down the principal balance over the fixed term. By my calculations, the interest saving would be roughly €7,400 over the 5 years.

However, because of the way mortgages are calculated, your principal balance will be roughly €3,000 lower at the end of the 5 years. That will have a compounding impact over the remaining 20 year term of the mortgage because you will be paying interest (at whatever rate) on a principal balance that will be roughly €3,000 lower than it would otherwise have been.

The bottom line is that it's well worth your while to switch your mortgage to Avant.
 

pguyo

Frequent Poster
Messages
89
I submitted an enquiry with one of the brokers online and they automatically retuen a list of all the documentation as required to submit application and €500 for the privilage.....€500 for forwarding documents to Avant.......
It is a pity you cant apply directly to Avant.
 

Bruegel

Registered User
Messages
8
I'm switching at the moment. Can I sense-check my logic here?

Depending on valuation, we may sneak in to <60% LTV but I suspect we will be more at the 62% range. Therefore KBC is 2.3% for 3 year fixed and Avant would be 2.1%.

Assumption number 1: We want to have the flexibility to trade-up in a 3 to 5 year period from now. Therefore avoid fixing for more than 3 years to avoid any break fees complications meaning the no-brainer of fixing for 7 years is out for us. Is this logic correct?

Taking a three year period: Interest saving for Avant over KBC is €380,000 x 0.2% x 3 = €2,280. Against that I get €3k cashback from KBC and can apply directly avoid dealing with brokers and potential fees there. [KBC better off by €720].

If valuation meant that we were below 60%, comparison is €380,000 x 0.3% (2.25% KBC v. 1.95% Avant) x 3 = €3,420 [Avant better off by €420].

Interest saving is a bit overstated as the balance will be reducing over 3 years [we are planning on taking a 15 year term]. KBC allow more flexibility in overpaying also.

Great to have a competitive entrant though.
 

Risk Reversal

Registered User
Messages
30
I suppose what I could do is a ‘multiple switch’...go somewhere that pays me 2% of the value of the mortgage, and then immediately go to Avant.

The 2% would put a chunk in the break-fee.

UB say that the break-fee is the lesser of two amounts:

1) Six months’ interest

2) [Redeemed Amount x (R - R1) x Days Left] / 360

R equals the interest rate available to the bank on money markets for the duration of the fixed period

R1 equals the interest rate available to the bank on money markets for the remainder of the fixed period

So let’s say 1) is €2,500 per €100,000 (I know it’s not)

And for €100,000, 2) should be [100,000 x (Negative - Negative) x 1,460] / 360,

So is 2) a negative number, and therefore zero?!

The rates that Irish financial institutions get on money markets for 1-5 year deposits are negative, so how can the formula throw up a positive number?

And I fixed for 5 years but it turned out to be 5.5 years. Is it 5 years or 5.5 years for the purposes of the calculation (which may be a moot point)?
Depending on the negative numbers, two negative numbers in that formula can throw up a positive number
 

SPC100

Frequent Poster
Messages
624
Why favour five years over three?

We expect downward competition pressure to continue?
Ability to complete repossessions can't get worse.
We still are soon higher margin that most of europe?
 

Gordon Gekko

Frequent Poster
Messages
4,473
Depending on the negative numbers, two negative numbers in that formula can throw up a positive number
Many thanks, but I’m struggling to see how when it’s institutional deposit rate for 5 years minus institutional deposit rate for 4 years, both of which are negative, and with the 5 year number less negative than the 4 year number, how that can be positive.

-X - (-Y) has to be negative surely when X>Y

Or am I missing something?
 
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Risk Reversal

Registered User
Messages
30
Many thanks, but I’m struggling to see how when it’s institutional deposit rate for 5 years minus institutional deposit rate for 4 years, both of which are negative, and with the 5 year number less negative than the 4 year number, how that can be positive.

-X - (-Y) has to be negative surely when X>Y

Or am I missing something?
Not necessarily. The banks fund themsleves off Euribors in the interbank swap market. These tend to move around a good bit.

So in your example the 5 year swap rate at the start of June 19 for instance was circa -0.20% but the four year swap rate in June 2020 was circa -0.35%.

So X - Y for that example would be +0.15
 
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