Type’s of mortgages
The information below is a general guide to the mortgages available to you from the many lenders in Ireland.
In order to discover the best option available to you, please refer to a qualified lender or Independent Financial Advisor.
An endowment mortgage is a type of interest-only loan With an interest-only mortgage, you are repaying just the interest and need some other way of clearing the remaining debt. That’s where the endowment part of this package comes in.
An endowment policy is a type of stock market investment which runs alongside your mortgage. You make a monthly payment into this policy, and the idea is that the value grows substantially, so that at the end of the mortgage term, you are able to pay off the outstanding capital and in some cases have cash left over.
This type of mortgage was sold wrongly to many people in the past with the result that there was a short fall when the mortgage re payment was due leading to people having to take out a fresh mortgage for a few more years or a loan to pay the short fall off.
This is the way most mortgages used to be and still remains the only way the property is actually guaranteed to be yours at the end of the mortgage term, provided you have repaid the loan. Your mortgage debt is divided into capital repayments and interest payments.
As you pay off your mortgage every month you're paying off a bit of capital and a bit of interest until the full debt is repaid. This means that at the start of the payments you will find that you are paying more off the interest than the loan amount , but as the loan amount gets less you will eventually be paying the loan off and less interest. The payment can still vary with interest rates.
It is switching your existing mortgage to another mortgage lender, in order to possibly take advantage of another lenders offers or just to release some equity out of your property for your self.
This is when the financial institute lends you the full amount that the property costs.
Fixed Rate Mortgage
This type of mortgage is where you and the mortgage lender agree to fix the interest rate owed on your loan for a set period of time. The period of time is usually between 1 and 5 years but could be longer. After the agreed period, the interest rate owed on your loan usually reverts to the lender's Variable Rate.
At this point another set rate could be allowed or you could shop around for another lender that is offering a better deal.
You can alter your monthly payments to suit your changing circumstances without penalty.
Base rate tracker
A base-rate tracker is just a mortgage with an interest rate that tracks the European Central Bank base lending rate.
This is a loan that is usually taken out to solve a temporary cash shortfall that may arise when buying a property or business, when you haven’t yet sold your own property so are waiting for funds to pay off this loan.
Buy to let
An increasing number of lending institutes are offering loans for a property you want to "buy to let" which means the lender is out right giving you the permission to let another party rent the property from you. Lenders do not usually allow you to rent out property that is mortgaged with out their consent.
Cash back Mortgages
This is an amount given back to you as a bonus in addition to the money you're going to be borrowing. You may use it to pay for moving costs and furniture etc. you are usually locked into this type of mortgage for a set number of years so that if you change lenders to soon in the future you have to also pay back the cash back so do bare this in mind before jumping in without reading the small print.
Capped rate mortgages
Capped rate mortgages are supposed to offer the best of both variable and fixed rate deals. You agree to have a limit ” a cap” ( which means that it will not go above a set level of interest that has been pre determined by the lender) while allowing the payment rate to fall if the variable rate drops.
Discounted Variable Rates
This is an interest repayment variation which would give new customers a discount on their standard variable rate for a set period. Your payments will go up and down, as with a standard variable mortgage, but you're paying less because of your discount. After the agreed set period the interest rate will switch into the lender's usual variable rate, at which time you can either stay with the same lender or shop around for a better rate.
Equity Release Mortgages
With the rising price of houses in Ireland come a small advantage to people who are already home-owner, with or without a mortgage, you might want to release some of the increasing equity from your home without moving house, giving you a cash lump sum. Lenders provide a variety of packages for doing this, but they are generally described as "equity release" mortgages. You will usually be able to borrow up to 95% of the equity in your home, given to you in a lump sum which you then pay back like a normal mortgage.
Shared Ownership Mortgages
This is a mortgage held by more than one person, with the amount lent being based on the income’s of all those people. The property being purchased is also jointly owned by all the people on the mortgage, so four friends might buy a house, based on all four of their incomes, and 25% owned by each of them. It is possible at any stage for the party to buy each other out but this is an arrangement that has to be agreed by the lender.
Warning: If you do not keep up your repayments you may lose your home. Having a mortgage is a contract with the lending institute and if the payments are not made, you would be breaking your part of the agreement.
Warning: You may have to pay charges if you pay off a fixed-rate loan early. A fixed rate contract is set for a certain amount of time and if you decide to pay off the amount earlier than the agreed time, you may be penalised for not keeping with the terms of the contract
Warning: The entire amount that you have borrowed will still be outstanding at the end of the interest-only period. As you are only paying the interest part of the loan, you still have to come up with the sum borrowed at the end of the term.
Warning: The cost of your monthly repayments may increase. The payments on a variable rate mortgage are based on the European Central Banks rates and if this does go high, so will your monthly payments.
Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating, which may limit your ability to access credit in the future. If the payments are not made, you have broken your contract which means that should you wish to apply for further loans or credit in the future, this would work against you with other lending institutes.