New Mortgage-10 year Fix?

Hi,

Myself and the other half are looking to get a mortgage for a self build. We will probably look for in the region of €200k. We both earn about €28K each (My earnings should increase in the next couple of years, fingers crossed). I have approx 35K in savings & no loans, boyfriend has a car loan which will be paid off by september and modest savings.

My question is would we be crazy to say get a 15 year mortgage, fixing the 1st 10years? 4.5% PTSB * To avail of a fixed rate you must have a loan to value of 50% or less (so not sure if we would even qualify). This would cost 1529.98 per month. I've been reading on here about people struggling with mortgage payments so want to be careful before commiting to this plan, can we afford this? Basically want to pay this off in the shortest possible time to avoid huge interest payments without being completing skint over the duration, any better ideas welcome!

Also what are peoples opinions on when my savings are best used towards the build, should we use before we draw down on a mortgage or leave to furnish house or split half & half?

Not sure if this way the best section to put it in, feel free to move.

Thanks,

Aishling

This is a good mortgage calculator.
http://www.drcalculator.com/mortgage/ie/

I'd start out with a 20 year, even if you fix for 10. If you have extra cash you can always put it aside over that time and pay off a lumpsum after the 10 years. Whereas starting with the least years could put you under pressure whilst starting out with your house, bills and any changes in circumstance.

I would agree with previous poster and go with a longer term initially.
Also I feel 10 years is a long time to fix as anything can happen in that time and we don't know where interest rates/wages/the economy in general will be in say 5 yrs. Also you say you want to pay it off as quickly as possible to avoid large interest payments - well if you fix you will not have flexibility in that you will not be able to pay off early or pay a lump sum without penalty so defeating the purpose.
If you want the security of the fixed rate and knowing what you will be paying back but also the flexibility try fixing 50% of the mortgage and leaving the other 50% on a variable rate.

Thats very large repayments for two workers on average wages, i know myself and my partner couldn't afford that repayment.
Its good to want to pay off the mortgage asap, but if circumstances change, i.e kids, tax increases (almost a certainty) etc, it could leave you very stretched. A 20-25yr mortgage might be a better option.

The 10yr fixed of 4.5% is a good rate, but if they had a 5yr fixed of around 4% i'd jump at that first. You could also enquire if they allow a percentage of your mortgage fixed and a percentage on variable, that would allow you to pay off extra money on the mortgage should you have it. You can still make monthly payments of €1500+, but you can reduce them if money is tight.

Be very careful and think long term, i.e. family planning and increased expenses once you have kids.
Lot of young families dont realise that once they have kids expenses goes through the roof. I will say dont over-commit yourself and come down to a level more affordable for you 1.5k/month is absolute max. you can afford.
If I will be you I will bring it down to 1K and take a longer term but then its me.

I think c€1,500 per month is much to high for your combined salaries.

Thanks for the replies, I think you right, dont know whats around the corner, probably go with 20/25years... what are your opinions on fixing for 10 years? Have a meeting with the bank tomorrow

Fixing for 10 years seems way too long to be honest. Most people fix for 3 years or maybe 5. You could consider fixing part and leaving the other part variable so you still have flexibility to repay extra amounts and so reduce the term. Fixing won't always allow extra payments, eg my fixed rate allows an extra payment of €65 a month but that's all. I'm fixed for 2 years.

aishling said:

Thanks for the replies, I think you right, dont know whats around the corner, probably go with 20/25years... what are your opinions on fixing for 10 years? Have a meeting with the bank tomorrow

Click to expand...

If you want certainty of payments for the next 10 years and do not intend to make lump sum repayments, overpay your mortgage or pay off your mortgage early then it's not a bad idea. I am of the opinion that if you are fixing then do so for as long as possible, this means you are doing it for the right reasons and not just naively trying to time the market.

Just remember you are paying a premium for 10 years peace of mind not to save money so try to forget about following the ups and down of variable rates, it will drive you loony otherwise.

In the US 30 year fixed rates are the norm, if everyone was forced onto a 30 year fixed from the beginning of their mortgage we wouldn't be in half the mess we are in today.

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Yes I want certainty of payments, Im not trying to beat the markets...Im of the opinion that the banks have worked out what the think will happen and averaged it out over the fixed period so it should work out roughly the same as going variable without the highs and lows plus a premuim for peace of mind as you mentioned Norfbank Of course their magic ball could be wrong too in which case someone will loose out but at least we know what to expect & that we can afford it!

Bank reckon we can get a mortgage of 210K over 20 years