Preferential Mortgage V Standard

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clipper1981

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I have been approved for 2 mortgages of 300,000

1. Preferential

First 190k @ 3% and remaining 110,000 at goverment referece rate over 35 years. Due to preferential rate I have to pay benefit in kind on top of this. Will be at the 20% tax rate

2. Standard

Tracker Mortgage @3.4% over 35 years.
Included in this option, the lender will pay my life assurance for the first year and also the valuation fee for the house.

Can someone please help me work out which option would be best to go with?
 
clipper1981 said:
First 190k @ 3% and remaining 110,000 at goverment referece rate over 35 years. Due to preferential rate I have to pay benefit in kind on top of this. Will be at the 20% tax rate
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I don't understand this. What is the "goverment referece rate" and why is BIK an issue? Is this a preferential rate loan from your employer?
Tracker Mortgage @3.4% over 35 years.
Included in this option, the lender will pay my life assurance for the first year and also the valuation fee for the house.
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Life assurance for one year and valuation is probably worth about €200-€300 so it's peanuts in the greater scheme of things (i.e. the total interest bill over the full term of the mortgage). Don't be distracted by silly offers like this or one year new business discounted rates elsewhere etc.

You need to work out the precise costs of each option - e.g. interest and BIK in option 1 (most likely income tax of 20% or 42%, PRSI Class A of 4% and health levy of 2% (?) on any nominal gain attributable to the discounted rate) and interest in option 2. Estimating the interest can be done with Karl Jeacle's mortgage calculator.

Do you really need to borrow over 35 years?
 
Clubman BIK is an issue as the rate is offered by my employer. I am told BIK is charged on the difference between Pref Rate 3% and Gov Rate 3.5%.

BIK wil indeed be paid at the 20% tax rate with PRSI Class a of 4% and health levy of 2%

Based on my income at the minute 35 years allows me to make the interest repayments.I intend to make extra payments into the mortgage when my income increases, with a view to lowering the length of the mortgage term.
 
clipper1981 said:
Clubman BIK is an issue as the rate is offered by my employer. I am told BIK is charged on the difference between Pref Rate 3% and Gov Rate 3.5%.
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I see. I guess it's covered in this Revenue FAQ so. You might want to verify these details for yourself rather than taking somebody else's (e.g. your employer's) word for it.
Based on my income at the minute 35 years allows me to make the interest repayments.
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What do you mean the interest payments? Is this an interest ony mortgage or something?
 
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