I want a 7 year mortgage term, Broker says Avant wants 15 year term

[kodirl]

Hi folks,

I am in the process of switching mortgage from UB to Avant.

House Value €395k
Loan amount required from Avant €157k
Currently repaying €920/month with UB though I have been overpaying this by €500/month for the past 8 months (€1,420)

I have received Acceptance In Principle from Avant based on a 15yr term @1.95% for loan of €157k.

However, I queried our broker as I would prefer to do a fixed 7year rate and pay the mortgage off in that time. The broker has come back with the following:

"In order to reduce to 7 years the bank would need to see your monthly mortgage repayments along with an additional savings of 1,000 a month for 6 months. I have just had another look at your statements and cannot see a build of savings at that level over the last 6 months."

Is the above correct, as in I cannot change to 7years fixed even though I have savings of approx €20k and have been overpaying mortgage by €500/month?

 

[Cantillon]

Fix for 7 years of a 15 yr mortgage?

Or apply for a 7yr mortgage?

If the latter, that looks like repaying 157k over 7 years, meaning 1869 per month excluding interest.

You currently pay 920+500 = 1420.

You are requesting to repay 1869 + interest.

I can see why the bank are wondering can you afford that.

 

[kodirl]

If it was a 7year mortgage the repayments would be €1,999.84 per month , including interest . That's an increase of €580 per month on current payments which we can afford as we will have one child finishing in childcare in July releasing approximately an additional 800euro per month also.

I was just wondering if the broker was suiting themselves with the statement above ( they are probably getting some fee from Avant , probably based on the longer the loan and higher the value?) or whether it was actually the mortgage provider behind it.

 

[Brendan Burgess]

I am sure that the broker is telling you the truth.

Avant must stress test the application and they don't want a customer who aims too high, and who goes into arrears.

So sign up for a 15 year mortgage.
Fix the rate for 7 years as that is the lowest rate.

Then you can overpay by 10% a year without penalty.

So, if you borrow €157k, you will be able to pay off €15k extra in the first year without penalty. Specify that you want the term and not the repayment reduced when you make the overpayment.

The following year, you will be able to pay off about €13k extra.

And if it suits you not to overpay, then you can take a break from the overpayments. (If you sign up for 7 years at the start, and you run into problems, then you will go into arrears- and have a damaged credit record for 5 years.)

If you want to pay more than €13k, it is very likely that there will be no break fee for people borrowing at today's rates.

If there is a break fee, it is capped at 2% of the amount repaid.

Brendan

 

[kodirl]

I am sure that the broker is telling you the truth.

Avant must stress test the application and they don't want a customer who aims too high, and who goes into arrears.

So sign up for a 15 year mortgage.
Fix the rate for 7 years as that is the lowest rate.

Then you can overpay by 10% a year without penalty.

So, if you borrow €157k, you will be able to pay off €15k extra in the first year without penalty. Specify that you want the term and not the repayment reduced when you make the overpayment.

The following year, you will be able to pay of about €13k extra.

And if it suits you not to overpay, then you can take a break from the overpayments. (If you sign up for 7 years at the start, and you run into problems, then you will go into arrears.)

If you want to pay more than €13k, it is very likely that there will be no break fee for people borrowing at today's rates.

If there is a break fee, it is capped at 2% of the amount repaid.

Brendan

Brendan, many thanks for your advice.

 

[Blackrock1]

Avant appear to be very strict on stress testing, id take brendans advice above and go with them but overpay to the limit allowed (or to the level you want to)

 

[Dave Vanian]

If it was a 7year mortgage the repayments would be €1,999.84 per month , including interest . That's an increase of €580 per month on current payments which we can afford as we will have one child finishing in childcare in July releasing approximately an additional 800euro per month also.

Avant, like most lenders will only base their calculations on what they can see in your historic financial statements, not what you tell them is going to happen for you in the future. So if they can only prove that you can repay €580 less per month than what you want, by reference to your present financial situation, then that's what they'll look at.

( they are probably getting some fee from Avant , probably based on the longer the loan and higher the value?)

Brokers get paid a percentage of the amount you borrow, so Avant will pay your broker the same whether it's 7 years or 15 years.