MORTGAGES QUESTIONS AND ANSWERS

What Types Of Mortgages Are Available?

There are three main types of Mortgage, Fixed Rate Mortgage, Mixed Rate Mortgage and a Variable Rate Mortgage.

Fixed Interest Rate Mortgage - To pay the same monthly repayment consistently throughout the life of the loan

Mixed Rate Mortgage -To ensure payments over the first four years, guaranteeing the interest rate in case of possible rate increases in the short and medium term. After this initial period, your mortgage will be adapted to the current market interest rate and will be revised annually.

Variable Rate Mortgage - To enjoy a lower interest rate during the first year and have your Mortgage repayments revised annually according to the interest rates in force at the time.

What Is An Interest only Mortgage?

An interest only mortgage is one way to repay your mortgage, the information below will help you to decide whether an interest-only mortgage is right for you. An interest-only mortgage means your monthly payments cover only the interest on the loan. They do not pay off the amount you owe. So, at the end of the mortgage term, assuming you have made all the interest payments, you will owe the same amount that you borrowed at the beginning. You need to have a lump sum available to pay the mortgage back in one go at this time. Make sure you make arrangements to pay off the loan when the mortgage ends. If you don't, you could lose your home.

How To Pay Off An Interest-Only Mortgage?

If you choose an interest-only mortgage, make sure you know from the outset how you intend eventually to pay off the loan. You don't have to arrange this through your lender. Your main options are to:

1. Save Regularly -You make payments into a savings or investment scheme each month to build up a lump sum to pay off the loan when the mortgage term ends (or sooner if you can afford it). There is a risk if the savings plan does not build up a big enough lump sum by the end of the mortgage term.

2. Convert To A Repayment Mortgage Later -This might be a suitable option if, say, your earnings are low now but are expected to be much higher in future, for example, when you've finished training or gained professional qualifications. Using an interest-only mortgage keeps your monthly payments down until you can afford the higher monthly payments of a repayment mortgage. Because you're putting off repaying the capital you will end up paying more interest and more in total for your mortgage over the term.

3. Use A Lump Sum From Somewhere Else -For example an inheritance, or selling something such as another property or a business. This is usually a risky strategy - how sure are you that the inheritance will materialise, what happens if your business fails?

4. Sell The Mortgaged Property To Pay Off The Loan -This is suitable only if you won't need to live in the property - for example, if it is a buy-to-let property or a second home, or you are buying something smaller or cheaper.

How Much Can I Borrow?

The banks usually require that the amount of the loan does not exceed 80% of its value if the property is to be used as your main residence and up to 55% of its value if the property is to be used as a second home or investment property.

What Is The Term Of Mortgage?

The term of the loan must be greater than 3 years but no more than 25 years although in some cases they may allow terms of up to 30 years.

How Often Are Payments Made?

You are required to make payments monthly, quarterly or bi monthly and you are allowed to make over payments providing that the amount you wish to overpay is greater than 3000 euros.

Do I Need Mortgage Protection?

To compliment your Mortgage you can arrange for Mortgage Protection Insurance. This is around d 1.1% of the value of the loan.

What Documentation Do I Need to Produce?

If you wish to apply for 60% Non Status Interest Only Mortgage then all you need, in addition to your passport, is self-certification i.e. a document stating how much you earn.

For other types of mortgages you will need:

Passport
Latest P60
Last 3 Pay Slips

If you are self-employed, you will need to produce either the last one or two years accounts, depending on bank.