All Ireland Mortgages

What are the various types of Mortgages?

admin — Wed, 02 Apr 2008 12:39:12 +0000

There are numerous types of mortgages as follows:

Annuity Mortgage

The annuity or repayment mortgage is the most common way to pay off a mortgage. The monthly repayments include the payment of interest and some of the principal or capital of the loan. In the early years the majority of the payment is interest and you can claim mortgage interest tax relief at source.

The further into the life of the mortgage you will be paying less interest and more capital until eventually your mortgage is cleared.

Endowment Mortgage

After the exposure of the high costs & charges back in the ealry 1990s, the sale of endowment mortgages, which combines a homeloan with a life assurance policy, collapsed.

The basis of the Endowment Mortgage was that you made monthly payments into the endowment investment policy to accumulate a sufficient investment sum at the end of the term of the mortgage to clear the original loan amount.Along with the monthly investment contribution you would also be servicing the interest on the mortgage on a monthly basis.

With the high charges, reduced tax relief and market volatility the value of some of these Endowment Policies has fallen short of the required amount to clear the original loan amount at the end of the term. Most existing Endowment Mortgage holders have discovered that in order for their loan to be repaid at maturity, they must increase their contributions.

Pension Mortgage

The Pension Mortgage is an attractive and tax efficient method of purchasing a property.

Pension mortgages are particularly attractive where an individual may wish to use their pension to purchase a Commercial Property or ‘Buy to Let’ residential investment property.

The principle of the Pension Mortgage is similiar to the Endowment Mortgage in that you are building up a lump sum for the future to be used to clear off the original loan amount.

However, the Pension Mortgage offers substantial tax reliefs both on the monthly contributions to the pension and at present you can take 25% of the final pension value as a tax free lump sum, to be used to clear off the original loan amount.

With both Commercial & ‘Buy to Let’ Residential Properties you are also able to avail of 100% of the interest relief against rental income for tax purposes.

Interest Only Mortgages

Interest only mortgages are mainly available to property investors , such as ‘buy to let’ investors who intend on selling the property before the end of the loan term, using the capital appreciation to pay off the original loan amount.

This method is attractive to Property Investors as they are not tying up capital in their property and generally speaking the rental income will more than cover the interest only repayments on the loan.

Warning: The entire amount that you have borrowed will still be outstanding at the end of the interest-only period

Current Account or Offset Mortgages

This type of mortgage is only available from a small number of Lenders. The mortgage combines your variable rate repayment and your current account balance to reduce the overall balance on the mortgage when calculating the daily interest to be charged.

You can combine savings balances with your current account balance to further reduce/offset the overall mortgage balance used to calculate the daily interest charged.

Over the course of the loan there would be substantial interest savings and you still have access to your current account & savings balances.

Switch your Mortgage & Save Money

admin — Sat, 14 Apr 2007 16:42:35 +0000

With interest rates having risen by 1.75% over the past 15 months you will have noticed that your monthly repayment has increased substantially, unless you were one of the fortunate ones to have fixed at historically low rates.

Due to intense competition in the market place many of the Banks are now offering “Switch & Save Options” for mortgages.

These options include genuine long term interest rate reductions, discount introductory interest rates and some the Banks are even willing to offer contributions towards the cost of switching.

The following is an example:

A couple who owe €250,000 on their existing mortgage with 20 years remaining and their house is worth €500,000.

Bank A (Their Existing Bank) are charging them a current variable rate of 5.20% APR resulting in monthly repayments of €1,662.34.

They Switch Mortgage to Bank B (New Bank) – their monthly repayments in the first year will reduce to €1,541.43 based on a 1 Year Discount Tracker Rate of 4.27% APR.

Assuming no interest rate changes, their monthly repayments for the remaining 19 years would be €1,561.45, based on a Tracker Rate of 4.43% APR.

Because this Couple Switched Banks, they will save €24,453.84 over the remaining 20 years of their mortgage.
In addition they have the added security of knowing their interest rate is linked to the European Central Bank Rate going forward.

All Ireland Mortgages have access to all Banks and have the knowledge & expertise to advise you on the best options available.

Relief against higher interest rates for Landlords & Property Investors

admin — Sat, 14 Apr 2007 16:40:04 +0000

European Central Bank interest rates were put on hold on Thursday the 12^th of April 2007 after a previous increase of 0.25% to 3.75% on Thursday the 8^th of March 2007. This has resulted in a total increase of 1.75% over the past 15 months or an additional cost of €8,750 on €500,000 in borrowings for you the property investor.

The next interest rate increase is now expected to be 0.25% in June 2007.

Property Investors can beat the system by comparing their existing rates they are being charged, to the low Tracker Rates now available, including one at 4.60% APR (ECB +0.75%) available through All Ireland Mortgages.
The days of historically low interest rates are numbered & experts are predicting that ECB rates could hit 4% by the end of 2007.

If you are a Landlord or Property Investor who has built up a property portfolio over the past 5-10 years you should have a substantial level of equity, however, it is highly likely that you are paying interest rates of 5.50%+.

Unlike standard variable & fixed rates, Tracker Rates vary depending on the loan to value (LTV) and the level of borrowings (the lower the LTV & the greater the amount, the lower the Tracker Rate available).

Where your LTV is less than 75% and you can demonstrate sufficient rental income from the properties to cover the interest repayments on the mortgage, refinancing your existing portfolio through All Ireland Mortgages will allow you to avail of a Tracker Rate as low as 4.60%APR.

The process is simple; your investment properties will be valued, rental income will need to be certified & you “self certify” your other income.

SSIA

admin — Sat, 14 Apr 2007 16:30:02 +0000

Over 1 million of us signed up to an SSIA, saving up to €254 per month for 60 months, resulting in over €14 billion in savings for the entire nation.

Those who saved the maximum are expecting to receive approximately €20,000 and for couples that amount could be €40,000.

Approximately 70% of SSIAs weren’t taken out until the last few months of the scheme, therefore it is the months of March to May 2007 that the majority of the funds will become available to spend or reinvest.

The Question looming in everyone’s mind is: do I spend it on a holiday, new car or do I look at investing it for the future?

If you haven’t already received your lump sum you first of all need to ensure that you take the necessary steps entitling you to it.

First, make sure that your SSIA Provider has your up to date address, in case you have moved over the past 5 years.

Secondly, make sure you have an up to date statement of your SSIA and check to ensure all lodgements are accounted for.

Finally, you should receive an SSIA 4 Form from your provider.

What is an SSIA 4 Form?
This is a legal declaration stating that you qualify for the funds on maturity of your Account.

The declaration confirms that you qualify to hold onto the Government contributions (the 25% top up) without being penalised through a clawback of 23% of the entire value of your Account.

Therefore, you should only pay tax of 23% on the growth on the account, like DIRT on a savings account rather than on the entire value of account.

When you sign the declaration you are confirming that:

ü You held only 1 SSIA

ü You are the legal owner of the account

ü You were resident, or ordinarily resident, in the State over the 60 months (check with the Revenue if you are unsure of this)

ü The moneys lodged came from your own resources, i.e. you didn’t borrow money to fund it

ü You didn’t assign it as security for any borrowings

ü You confirm that all information provided is true

Options for your SSIA

Reducing your Mortgage Balance

With the ECB Interest rate having recently increased to 3.75%, the typical Tracker/Variable rate that people are paying on their mortgages is now between 4.50% & 5.50%.

If you take your €20,000 or €40,000 lump sum and lodge this directly against your Mortgage balance and you are paying an interest rate of say 5% on your Mortgage, you are effectively getting a tax free return of 5% on your lump sum as you have reduced your cost of borrowings by this amount.

If you were to leave the lump sum on deposit you would have to pay DIRT on interest earned.

By lodging a lump sum to your mortgage you can either reduce the term of the mortgage or reduce the monthly repayments.

Clearing personal loans, overdrafts & credit cards

If you have personal loans, overdrafts & credit card debt, where you are probably paying interest rates of between 8% & 20%, then it makes financial sense to clear these debts from you SSIA.As per the Mortgage scenario, clearing these borrowings is effectively giving you a tax free return of between 8% & 20%, which would be hard to achieve without taking a high risk with your investment.

When assessing which loans to clear, make a list of all outstanding debts and clear the ones with the highest rate of interest first, i.e. probably your Credit Card!

If you haven’t enough funds from your SSIA to clear all your debts, you should redirect your monthly SSIA contribution to paying off the balance of your debts faster and maybe look at refinancing your debts on a lower rate through one loan, with your Credit Union or Bank.

Savings Plan for the Future

If you have children, one of the biggest burdens in the future will be educational costs, i.e. college fees, books & accommodation.

A solution to reducing the burden of these expenses in the future is to use your SSIA funds as an investment for your children’s education in the future.

Therefore, on receipt of your SSIA funds you should look at reinvesting the lump sum and continuing the monthly contributions into either a high yield deposit account available through your Bank, Building Society, Credit Union or Post Office or through various Investment Funds with Insurance Companies.

The particular vehicle for investment will depend on the length of time before you need to access the funds for your children’s education.

If the children are due to start in college in the next 5 years, then the high yielding deposit option is best as the time you have to invest is short and you will want to avoid any short term volatility.

However, if your children are young and you are looking at 10-15 years before they start in college, then you should look at the various options available through the Insurance Companies, where you can invest in various assets, such as Commercial Property & Equities/Shares.

Starting or Topping Up a Retirement Plan

If you are a higher rate tax payer, diverting a monthly SSIA contribution of €254 to an existing or new Retirement Plan, would be the equivalent of investing €480 per month in your Retirement Plan as you will receive tax relief @ 47% on your contributions. The level of contributions is restricted to a percentage (based on your age) of your gross relevant earnings per annum.

You may also have the option of using the lump sum to make AVCs (Additional Voluntary Contributions) to your existing Retirement Plan.

If you are a low rate tax payer earning less than €50,000 the Government are offering a SSIA type top up when you transfer funds from your SSIA to a Retirement Plan.

The Government will make a once off top up contribution of €1 for every €3 invested in a Retirement Plan, up to a maximum contribution of €7,500 by the individual & €2,500 by the Government.

Welcome to All Ireland Mortgages

admin — Tue, 12 Dec 2006 16:08:55 +0000

Welcome to All Ireland Mortgages and our new site. We will be fine-tuning over the next couple of days so please bear with us. Feel free to tell us what you like and what you don’t.