Should I borrow the max amount and keep cash?

D

dilema

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Hi all, first time posting so hope this is right place!

would really appreciate advice re mortgage


i am purchasing house for 175

Have 70 in savings

am buying house by myself

i am thinking of putting most savings 60 grand into mortgage , then take out mortgage for 115 for 20 years

some people are saying mortage is lowest interest rate loan i will get and should keep back 30-35???

any advice be greaty appreciated.
 
A mortgage is the lowest interest rate you will get.

But will you be borrowing more money? When will you be borrowing it?

It usually doesn't make sense to borrow money at 4.5% while you have it on deposit at 2.5%.

It would make sense only if you had a fairly short to medium term plan to borrow that amount of money again for a car or a business.
 
Thanks Brendan,
Plan is not to have borrow again, save up 25 k. To do work on house in 3years .
 
If you are spending only €25k, why keep €30k to €35k in cash?

If you borrow the minimum, your repayments will be much smaller, which means that you can start accumulating cash again.

If you have a good secure income and a mortgage of €115k on a property worth €170k, you should have no problem adding €25k to your mortgage in three years.

You may even be able to discuss this with the lender now. For example, get a mortgage of the full amount. But then immediately pay €50k off it with their agreement that you can withdraw it at a later stage.

Brendan
 
Thanks again Brendan, I did not think of that, sounds great idea, was thinking keeping extra ten as emergency fund! At this stage I am sale agreed, mortgage approved ,

just I have to decide how much mortgage I am going take out,
and how I'm going to fix it e,g, fixed or variable or both.
 
Hi dilema

Given that you need to remain flexible, you should go for a variable rate mortgage. You can pay it off early without penalty. A fixed rate mortgage gives you some insurance against rate increases, but it seems to me that you can well afford rate increases.
 
I would recommend that you consider getting a mortgage with a redraw facility. This allows you credit your savings to the mortgage account but they are always available if you need them. Beauty of this type of mortgage is that you only pay interest on the net balance. You have the advance of the lower mortgage, with the savings available alongside if required.

Important that you get the right type of mortgage and that the Bank confirm you dod not need to go through a new mortgage application to get the funds back though, as that would defeat the purpose.
 
thanks all . it is such a help to hear all the options.
am really interested in the redraw facility option, must look into this more,
cheers
 
short term gain/long term pain?

I'm about to be in a similar position to the OP.

I never heard of 'redraw' facility but sounds interesting so thank you, it reminded me of an 'Offset' account where the current account and mortgage account are one and the same, offsetting any savings/cash against the principal and reducing interest on the mortgage.

2 Questions

  1. Is the above 'consolidated' type mortgage on offer from any provider in Ireland and worth considering?
  2. In a redraw situation where the buyer has a lump sum that's going to be used to fix up the house : Isn't it cheaper in the long term to keep that lump sum on deposit for say 3 years vs putting it into the mortgage now (reducing payments in the short term) - only to withdraw it at a future date and then pay the SVR on that sum, until the end of the term???

  • i.e. Lump sum x 3 years @ 2.5% growth vs ((Mortgage Term minus 3 years) x Lump Sum @ SVR)) minus (3 years x Lump sum @ SVR)
 
No idea which banks allows a redraw facility these days. Suggest check with the individual banks. In the past many banks did it or something similar. Important to confirm that you do not need to go through a new mortgage application along the lines of a top up application. Not dissimilar to offset account though not sure latter was as common. Read terms and conditions closely.

Re question 2 - really a mathematical question. If you can get more by putting on deposit, net of tax of course, makes sense. Doubt in current environment that is possible if you are comparing deposit rate on offer these days less tax to SVR. But suggest you do the calculation to see.
 
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