First Time Buyers Ireland
Mortgage plus can offer great advice if you are a first time buyer within Ireland
First time buyer mortgage choices
With thousands of mortgage options out there, it can be difficult to work out where to start. But a bit of knowledge will point you in the right direction.
They're relatively straightforward things, mortgages. But you wouldn't know that from the language used and the range of different options out there. And without knowing what's available, how will you know what's right for you?
Here, we explain the different mortgage types on offer, and explain the benefits of each. Remember though, that if you are still unsure, you must seek professional advice - this is one of the largest financial decisions you are likely to make in life and taking free advice from a qualified expert to make sure it's a decision well-made is undoubtedly the right move.
Firstly, though, the majority of first time buyers mortgages listed - fixed, discount etc are known as mortgage 'deals'. They are special offers designed to entice you to that particular lender, who will then hope you stay with it for many years beyond the deal period.
In the past, that wouldn't have been much of a problem. Your parents, likely as not, stayed with the same lender for as long as they owned their home. Nowadays, however, it's much easier to move to a better deal and borrowers have cottoned on to the fact that remortgaging can save them thousands.
To combat this, lenders have redemption penalties attached to some of their deals. This means that if you pay off your mortgage within a specified period you will have to pay a penalty - a sum that can run into thousands.
SVR
A lender's standard variable rate (SVR) is its basic rate, from which the majority of its deals are calculated. It's also what you will expect to pay once your deal period ends. As the name suggests, the rate is variable, which means it can go up and down, usually in line with the European Central Bank base rate.
This isn't always the case, though. The lender has no obligation to set its rates according to what the European Central Bank does - indeed it can set it at whatever level it likes. It's basically only competition that will keep the rate in line with other lenders. So if the base rate rises, the lender can choose not to raise its SVR, but the same applies if it falls.
Fixed Rate Mortgage
A fixed rate mortgage sets the interest rate you pay back for a certain amount of time - usually between one and five years, although it can be for longer. When the fixed rate period expires, you will be transferred on to the lender's standard variable rate (SVR). But while you are on the fixed rate, regardless of whether the lender's SVR changes, your repayments will not.
A fixed rate is a small gamble. If interest rates fall, you will not see any benefit in your repayments. However, if they rise, you can rest assured that you won't pay any more either.
Fixed rates are amongst the most popular type of deal for first time buyers, who are looking for the certainty such deals offer. By allowing you to know exactly what your payments are for a specified amount of time, you can budget more effectively.
Discount rate Mortgage
If you're looking for the cheapest possible first time buyers start to your mortgage experience, then a discount rate may be the one for you. A discount rate mortgage entitles the borrower to a certain amount off the lender's SVR for a set amount of time. The more generous your discount, the greater the risk for the lender and so the less time it will apply for - or, perhaps, the greater the chance of overhanging tie-ins.
Remember though, that discount rates are variable, so they can go up and down. While your payments may be the lowest possible when you take out the loan, if rates start to rocket, they could end up looking like a false economy.
Capped Rate Mortgage
A capped rate mortgage is when a ceiling is put on the amount that you will pay. This means that when the lender's SVR rises above your capped rate, it won't apply to you. The highest rate you will ever pay is that of the cap. If you calculate your affordability on this then, you can't go too far wrong. Again, the longer you want the security of this cap, the higher
Tracker Rate Mortgage
A base rate tracker mortgage tracks the European Central Bank's interest or 'base' rate. The difference between your repayment rate and the base rate depends on the lender and the product but around one per cent above base rate is a good example. Unless you have a temporary discount offer - the mortgage will always track the base rate from above rather than from below.
When interest rates are cut having a base rate tracker is good news - the lender has no choice but to pass on the cut immediately. But on the other hand, if and when interest rates go up, then, automatically, so will your interest rate.
Flexibility Rate Mortgage
Flexibility in a first time buyers mortgage can be regarded almost like a seasoning - and it can be applied to any of the above mortgage types. Having a flexible mortgage means that you can take direct control of your loan in the form of making overpayments, underpayments, taking payment holidays and borrowing back from the mortgage. You are also guaranteed daily interest calculation and no redemption penalties or tie-ins beyond the deal period.
Final Verdict
The decision of which mortgage to take ultimately lies with you but if you require further help before taking the plunge, you can always seek independent financial advice. If you think this sounds expensive, it isn't, in fact it is free of charge. With Mortgage Plus you can work with a qualified mortgage advisor for free and they'll help you work out the best deal for you.
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