MORTGAGE OPTIONS

There are basically five types of mortgage are available as.........

1. Capital & Interest :Capital and Interest Mortgages are the most popular mortgages in the Irish Market. Payments are used to reduce both the initial borrowing as well as the interest accruing on the loan.

     Capital – which steadily reduces the balance of the mortgage over the term..                                           Interest – which is calculated on the reducing balance of the mortgage.   Repayments are calculated to ensure that, if made on time, the mortgage will be repaid in full at the end of the agreed term. Repayments are affected by interest rate changes and will decrease or increase in line with those adjustments. Following any change in the rate applicable to your loan, the lender will advise you of the new payment amount. 

2. Interest Only :

   Loan payments are used to cover only the interest owing on the mortgage and no contribution is made to reduce the initial amount borrowed.
   Payments are affected by interest rate adjustments and will decrease or increase in line with those alterations. Following any change to the rate applicable to your account your lender will advise you of the new monthly repayment.
   Because the repayments are only used to cover the interest, the amount of the mortgage has not reduced and the entire amount becomes due at the end of the agreed term of the mortgage.
   It is important that you make suitable arrangements to repay the loan amount outstanding (together with any accrued or unpaid interest) by the end of the agreed term of the mortgage. You will therefore need to contribute to an acceptable Investment or Pension Plan, which will cover repaying the borrowings at the end of this term, or have other suitable investments in place.
   We would also recommend that you obtain advice from one of our Independent Financial Advisors to find what Investment option would be most suitable for you.
   You should have some form of Life Insurance in place to repay the mortgage should you die during the mortgage term and we at The Mortgage Centre can advise you on this too.

3. Pension Mortgages :

   If your Self Employed and run your own business, or you’re a company director, a Pension Mortgage from The Mortgage Centre, Letterkenny, Co. Donegal might be the most tax efficient way to repay your home-loan,
   With a pension mortgage, a lump-sum from the pension is used to repay the mortgage loan when the pension matures.
   During the course of the pension mortgage, you make monthly payments that cover both the interest payable on the mortgage, and the investment required to build up an adequate pension fund.
   The real benefit of a pension mortgage is that you receive tax relief not only on the mortgage interest repayments but also on your contributions to the pension fund.
   And as it’s a pension, your investment fund grows free of tax.
    

4.  Tracker Rates :
   A relatively new mortgage concept to the Irish Market, a tracker rate is variable linked to the European Base rate for the whole term of the mortgage. The benefit is that lenders can only change their rate when the European Central Bank announces a rate change. Lenders tend to offer more attractive rates to customers borrowing less than 60% of the value of their home.
   Tracker Rate – This is a variable interest rate that tracks the European Base Rate* with a margin that is fixed for the full term of the loan. For example, the margin may be 1% above the European Base Rate.
   Any fall in the European Base Rate results in lower repayments, but any increase means higher repayments.
   Due to adverse market conditions the mortgage market has changed in 2008 and 2009. There are still some mortgage tracker rates available but some mortgage lenders have stopped offering this type of mortgage for the present.
   *European Central Bank Main Refinancing Operations Minimum Bid Rate.
    

5. Rate Options :

   • Tracker Variable Rate – a tracker rate is set at a fixed percentage (margin) above the European Central Bank (ECB) rate at the start of your mortgage. This extra percentage above the ECB rate will stay the same until you have paid off your mortgage. If the ECB interest rate rises your tracker rate will automatically rise as well. The opposite happens if the ECB rate falls.
   • Standard Variable Rate – a standard variable rate can rise and fall inline with general changes in interest rates. When the ECB rises, your mortgage lender can increase your variable rate, therefore your repayments will increase. The opposite can happen if the ECB rate falls. Most lenders have now removed this option.
   • Fixed Rate – with a fixed rate mortgage your interest rate and monthly repayments are fixed for a set time. After the fixed period your rate changes to a variable or tracker rate, or you may decide to get another fixed option. If you are in a fixed rate contract, you may face penalties if you want to switch lenders or pay part of your mortgage off during the fixed period.