How are we doing and where are we going?

[RedOnion]

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.

 

[garbanzo]

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.[/QUOTE


Good advice and comments here. RedOnion can check what I’ve bolded above in case i’m missing something. All the info I can see is it would be €28k (with the tax relief at 40%) and not €38k.

Is that correct?

 

[RedOnion]

@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?

 

[MrEarl]

....

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.

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).


.

 

[DiddleyBo]

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.

 

[DiddleyBo]

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 !

 

[RedOnion]

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?

 

[DiddleyBo]

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.

 

[RedOnion]

@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).

 

[MrEarl]

....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 ?