When does a mortgage get drawn down on a property?

eiregal

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210
If a property is under construction, is the mortgage only drawn down once it is completed? For example, if I put a deposit on a house and pay the remainder of 10% on signing of contracts but the property won’t be ready for, say, 9 months, can I save for those 9 months and pay it off the price of the property to keep the mortgage lower? Or is the loan already with agreed with the bank and can’t be changed?
 

Sarah W

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1,167
The loan amount can be reduced up to about 2 weeks before closing (to give the lender time to issue a new offer) as long as you can show that you have the difference in savings to satisfy the Money Laundering Act. Alternatively you can close on the offer you have and then just send in a cheque post completion if you really can't find another use for the money!

Sarah

www.rea.ie
 

eiregal

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210
I'm sure I could think of several other things to do with my money but I'm just afraid to commit myself to mortgage repayments that may be too high for me. By sending on a cheque, the repayments will remain the same, won't they, only the loan will be paid off sooner? I was thinking that if I deducted the extra savings from the loan amount, the repayments overall would be some way less. Am I right in thinking that?
 

salmon2005

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42
You would need to be careful on paying back a lump sum early as if you are on a fixed rate then the mortgage may charge you for it.I would advise keep the money untill you are sure you don't need it and know whether you are in a fixed rate or not then if you still want to pay it off the mortgage. Might also be worth looking at investing the extra money for a short time to cover sort term needs!-Just something to think about
 

Sarah W

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1,167
eiregal said:
I'm sure I could think of several other things to do with my money but I'm just afraid to commit myself to mortgage repayments that may be too high for me. By sending on a cheque, the repayments will remain the same, won't they, only the loan will be paid off sooner? I was thinking that if I deducted the extra savings from the loan amount, the repayments overall would be some way less. Am I right in thinking that?
You have two options - keep the repayments at the same level which will shorten the term or keep to the original term which will result in lower repayments but will make the mortgage more expensive overall. With either route ensure you make your wishes clearly in writing to the lender and get written confirmation.

Sarah

www.rea.ie
 

MOB

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1,123
One other point to add to Sara's extremely helpful reply. If you think that you might be able to reduce the amount of your mortgage, stick with a variable rate, on which there are no penalties for part redemption. Then, if it turns out that late in the day that you need less, you can perhaps avoid the hassle of having to get out a fresh loan offer, and simply return a chunk of the loan cheque straight to your lender.

Similarly for self-build houses, ALWAYS apply for as much as you can get, and leave it on a variable rate. You can always just not take the final instalment if it turns out you don't need it. As a practising solicitor, I hate the situation of having to do a second mortgage for an extra €10k needed urgently due to budget over-runs.

It's a client relations disaster area: No matter how little I charge, it will seem big relative to the sum being obtained.

Nett result: unhappy client, unhappy solicitor.
 
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