Plan to pay off house in 7 years, lock in 7yr (2.25) or go with 4yr at 1.95%?

[matrix]

Age: 33
Children: 1 (4 yo)
Income: 88k (78k base, 10k bonus)
Monthly take-home pay: 3794e (After pension and employer stock purchase program)
Debt: None
Do you own any investment or other property? No


Savings; Cash of €180k
Pension: 80k
Shares: €40k
Crypto: €25k
Stocks: €15k
Precious metals: €5k

What specific question do you have or what issues are of concern to you?

I have just gone sale agreed on a property for 320k, down-payment is 185k and it's a 30 year mortgage.
My plan is to hopefully pay off the mortgage in 7 years but opted for a 30yr for flexibility as who knows what can happen.

Avant are offering me a 4yr at 1.95% (495e per month) and 2.0% thereafter (probably subject to change) or i could go with the 7yr at 2.25% (516e).
Is it worth the risk going with the 4yr, given that mortgage rates could be > 5$ in 2026? Or just go with the 7yr?

Apologies for the basic question, this is all new to me.

 

[Brendan Burgess]

Normally, it is a good idea to opt for as long a term as possible for the reasons you mention.

But the problem is that if you overpay by more than 10% of the balance, you will be subject to an early repayment charge as it's a fixed rate.

So if you plan to pay it off over 7 years, opt for a shorter term. This will increase your repayments and so any overpayment will be smaller and any early repayment fee will be lower.

Brendan

 

[Brendan Burgess]

Here are your repayments if you pay it off over 7 years.

So I think you should go for the 4 year rate at 1.95%

You will be saving .3% on an average balance of about €90k

Yes, the rate is likely to be higher for the last three years, but the average balance will be only about €30k, so it will matter less.

If you were planning to pay it off over 30 years, then I would recommend the 7 year rate or even a longer term.

Brendan

 

[matrix]

Here are your repayments if you pay it off over 7 years.

View attachment 6327
So I think you should go for the 4 year rate at 1.95%

You will be saving .3% on an average balance of about €90k

Yes, the rate is likely to be higher for the last three years, but the average balance will be only about €30k, so it will matter less.

If you were planning to pay it off over 30 years, then I would recommend the 7 year rate or even a longer term.

Brendan

This is a fantastic breakdown, much appreciated Brendan. Thanks a million