Sunday Independent: Should I avail of a mortgage moratorium?

Q.
Should I avail of a moratorium? Will it cost me more?

A.
I believe that the demand for moratoriums will have reduced drastically this week following the Government’s announcement of the Covid 19 Wage Subsidy Scheme where Revenue will pay 70% of employees salaries up to a limit if €410 weekly (ie €1,775 monthly) and the increase in the Covid unemployment benefit to €350 weekly (ie €1,515 monthly) from €203. Given that it’s very difficult to spend money at present, most people should be able to meet their monthly financial commitments in the short term based on the above supports.

If you have been made redundant and cannot meet your monthly repayment, contact your bank immediately and apply for a moratorium it.

If you qualify but don’t need it, then don’t rush into it.. this choice can occur where somebody has been made redundant, has a mortgage repayment of say €1,000 monthly but may have savings of say €20,000. In this instance you can use €3,000 of your savings to pay your mortgage for 3 months. The reason why some people won’t avail of the moratorium is that if they wish to borrow again in the next couple of years, availing of the moratorium may go against them in terms of being approved for a new mortgage. As it stands most banks will want you to be making full repayments for 2 years after a moratorium before they will approve a mortgage. Also.m, a borrower will pay more interest in the long term.

For example a borrower has €350,000 outstanding with 32 years remaining and a variable interest rate of 3.15%. Monthly payments are €1,447.83 monthly. If they don’t make payments for 3 months they will pay an additional €2,651 interest on the 3 months deferred payments of €4,546 over the remaining 31 years 9 months.

Read the full article by Charlie Weston in the Sunday Independent here –
https://www.independent.ie/business/personal-finance/your-questions-im-worried-stock-market-turmoil-has-hit-my-pension-should-i-be-taking-action-39120072.html


Q My job in catering has been lost as a result of the coronavirus. It’s a large company and we’re told the layoff is temporary. My mortgage is with AIB and they are offering a three-month payment holiday on the repayments. But I understand it’s another loan of sorts? Should I take it or continue to pay the mortgage out of savings? My wife is still working full time and we could afford to do this. The payments are €1,240 p.m. and we have 16 years left on the loan.

A The mortgage moratorium has been billed as a bit of a payment ‘holiday’. It is no such thing. All that will happen is the three months’ payments will be rolled up and added on to the end of your loan, extending out the term. This has the effect of rolled up interest too, so the sums should be done very carefully before you decide.

Joey Sheahan, author of The Mortgage Coach, says: “As your wife is still employed and you can afford to meet the monthly repayment, I would strongly advise to continue making it. If your wife was not working and you did not have any savings, then you may not have a choice but to avail of a payment holiday/moratorium.

“The word ‘holiday’ indicates a pleasant experience, however anyone who avails of a moratorium will ultimately pay more interest over the life of their mortgage as you are deferring repayments of €3,720 in your case. Additional interest of around €968 would be paid on €3,720 over 16 years, assuming an interest rate of say three per cent. Another factor in making a decision on this is if you are planning on applying for a new mortgage in the future (for example if you were to switch your existing mortgage or move house).

“Based on current credit policy, which each bank sets on its own, some banks may not approve your new mortgage application if you have availed of an alternative repayment arrangement (which would include a moratorium/payment holiday) within the two years prior to applying for a new mortgage.”

So, do your own sums, but also ask the bank to outline, specifically, in writing exactly what it will cost you before committing.


Ten years on from the last financial crisis, recession looms once … Our muscle memory is strong, and there are things you can do right now to ease your finances and your mind. … more interest in the long term, says Joey Sheahan of mymortgages.ie.

If you have a rainy-day fund start eating into it now

We didn’t think we’d be back here again so soon. Ten years on from the last financial crisis, recession looms once more. But there’s a difference this time round: we’ve navigated these waters before. Our muscle memory is strong, and there are things you can do right now to ease your finances and your mind.
Mortgage
Keeping a roof over your head will be your biggest priority. With estimates that up to 350,000 people, or one in six of the working population, will lose their jobs as result of the Covid-19 pandemic, banks should be as worried about mortgage default as you are.

Ten years on from the last financial crisis, recession looms once … Our muscle memory is strong, and there are things you can do right now to ease your finances and your mind. … more interest in the long term, says Joey Sheahan of mymortgages.ie.

Read the full article by Joanne Hunt in the Irish Times here – https://www.irishtimes.com/business/personal-finance/how-to-budget-your-way-through-financial-realities-of-covid-19-1.4216004?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Fpersonal-finance%2Fhow-to-budget-your-way-through-financial-realities-of-covid-19-1.4216004


“The numbers stack up – switching could save an average mortgage holder anywhere in the region of €275 monthly or €3,300 annually or €99,000 over the life of a fairly average sized €280,000 mortgage over 30 years, with a LTV of less than 50%, by reducing the variable interest rate from 4.5% to 2.75%,” explained Joey Sheahan, Head of Credit at MyMortgages.ie.

“We need to do more to broadcast to every mortgage holder in the country that they could be in line for savings, and to explain to them that the process need not be arduous, complicated or intimidating as they might expect.”

AIB is cutting its fixed mortgage rates in a move that could save homeowners a massive €1,152 a year, based on a mortgage of €270,000 over 25 years.

The bank is reducing its three-year and five-year fixed mortgage rates for the second time in a year from 2.5% to 2.45%, with immediate effect. AIB also reduced its ‘Green’ five-year fixed rate mortgage from 2.5% to 2.45%.

AIB customers, who are currently on their variable mortgage rate of 3.15%, could save €96 a month (€1,152 a year) if they switch to the Green five-year rate, based on a mortgage of €270,000 over 25 years.

Figures from the BPFI say that in the final quarter of 2018 there were 1,684 re-mortgage/switching loans, and experts say more needs to be done to let homeowners know that they could be eligible for savings and that it is not as “arduous, complicated or intimidating” process as they may expect.

“The numbers stack up – switching could save an average mortgage holder anywhere in the region of €275 monthly or €3,300 annually or €99,000 over the life of a fairly average sized €280,000 mortgage over 30 years, with a LTV of less than 50%, by reducing the variable interest rate from 4.5% to 2.75%,” explained Joey Sheahan, Head of Credit at MyMortgages.ie.

“We need to do more to broadcast to every mortgage holder in the country that they could be in line for savings, and to explain to them that the process need not be arduous, complicated or intimidating as they might expect.”

Read the full article on RSVP here –
https://www.rsvplive.ie/news/irish-news/homeowners-could-save-more-1k-21571842


Rates are coming down due to more competition between lenders, according to Joey Sheahan, head of credit of MyMortgages.ie and author of ‘The Mortgage Coach’.

“But there is still a gulf between what our lenders are charging and what our European counterparts are offering their mortgage holders.

MORTGAGE rates in this country have fallen below 3pc for the first time in years.

But there is scope for much deeper cuts, mortgage experts said.

New figures show home buyers in this country with new mortgage agreements are still paying double the average rate in the rest of the Eurozone despite the fall in rates.

This is costing the typical new buyer €2,000 more a year than their European counterpart.

The average rate paid on a new mortgage in this country was 2.88pc in December, the Central Bank said.

This was down 13 basis points on the same month in the previous year.

However, the average rate being paid in the Eurozone is half of the one in this country, at 1.37pc.

Ireland is the second most expensive country in the Eurozone for mortgage rates after Greece.

Rates are coming down due to more competition between lenders, according to Joey Sheahan, head of credit of MyMortgages.ie and author of ‘The Mortgage Coach’.

“But there is still a gulf between what our lenders are charging and what our European counterparts are offering their mortgage holders.

“We would hope that this gulf will continue to narrow over the coming years. We believe that there is scope for a cut of up to 0.25pc on some fixed rate terms,” he said.

Daragh Cassidy of price comparison site Bonkers.ie said the average first-time buyer mortgage in Ireland is around €225,000.

This means someone borrowing this amount over 30 years is paying almost €172 extra a month or over €2,058 a year compared to our European neighbours.

“That’s money that could be put to far better use,” he said.

He advised potential first-time buyers who are at the start of the mortgage journey to do their research.

“While the average new mortgage rate in Ireland is still close to 3pc, there are now rates as low as 2.25pc on offer,” he said.

Read the full article by Charlie Weston here –
https://www.independent.ie/business/personal-finance/mortgage-rates-drop-below-3pc-central-bank-38957118.html


One thing you may not have considered is Revenue’s Help-to-Buy (HTB) scheme. Because you want to buy a new-build, you may well be eligible, according to Joey Sheahan, head of credit with MyMortgages.ie and author of the newly released ‘The Mortgage Coach’.

If you qualify for the HTB scheme, you can claim up to 5pc of the purchase price of the house as a tax rebate

Your Questions

Q: My partner and I are renting a three-bed house in Galway for €1,300. We have just learned that we will be having our first baby at the end of the year and we would absolutely love to have our own home by then. We both have secure incomes as young teachers of €35,000, but we are really struggling to get a deposit together. The property we have our eye on is €270,000 and in a new development near where we already live. We have €5,000, and gifts from our parents will bring that up to €15,000. But that is still not enough. Is there any help out there for us?

A: One thing you may not have considered is Revenue’s Help-to-Buy (HTB) scheme. Because you want to buy a new-build, you may well be eligible, according to Joey Sheahan, head of credit with MyMortgages.ie and author of the newly released ‘The Mortgage Coach’.

To give you an idea of where you stand, you will need a total of around €32,400 to purchase the property.

This is made up as follows: 10pc, or €27,000, as a deposit, plus 1pc stamp duty of €2,700, and 1pc, or €2,700, toward legal costs.

Read the full article by Charlie Weston here –
https://www.independent.ie/business/personal-finance/we-need-to-buy-a-home-with-a-baby-on-the-way-is-there-help-available-38958512.html


MyMortgages.ie spokesman Joey Sheahan said he expects competition to “heat up”.

He added: “Existing and prospective mortgage holders should take note – there is great value on fixed rates.

“If you are applying for a mortgage, then you absolutely need to look at what all lenders are offering.

“And if you are already tied into a mortgage contract, then you should look at what your switching options are.”

Mortgage experts say homeowners could save up to €100,000 by switching to the lowest rates.

With specialists predicting the competition will begin to “heat up”, AIB has become the latest bank to announce a cut in its fixed loans.

It was claimed 220,000 borrowers currently on standard variable rates of up to 4.5% could benefit.

AIB announced yesterday it is cutting its three and five-year fixed rates from 2.85% to 2.55% and its green five-year fixed rate from 2.5% to 2.45%. This is its second mortgage rate reduction in less than 12 months.

Meanwhile, MyMortgages.ie spokesman Joey Sheahan said he expects competition to “heat up”.

He added: “Existing and prospective mortgage holders should take note – there is great value on fixed rates.

“If you are applying for a mortgage, then you absolutely need to look at what all lenders are offering.

“And if you are already tied into a mortgage contract, then you should look at what your switching options are.”

Read the full article here –
https://www.dublinlive.ie/news/business/homeowners-could-save-up-100000-17808147


“Prices are stabilising but many first-time buyers are still struggling.

“There can be no doubt that thousands have stable incomes and can afford mortgage repayments, but need help to get that initial leg up on the property ladder.”

House prices have increased by more than 80% from their lowest point in 2013.

The latest Residential Property Price Index, issued by the Central Statistics Office (CSO), shows that prices are continuing to increase, albeit at a slower rate than this time last year.

In 2019, property prices increased by 0.9%. In 2018, the rate of increase was 6.3%.

Joey Sheahan, head of credit at MyMortgages.ie, said, “Prices are stabilising but many first-time buyers are still struggling.

“There can be no doubt that thousands have stable incomes and can afford mortgage repayments, but need help to get that initial leg up on the property ladder.”

Brokers Ireland echoed this sentiment, noting that first-time buyers are experiencing “continuing difficulty” in accessing the market.

Read the full article here –
https://www.irishexaminer.com/breakingnews/ireland/house-prices-have-increased-over-80-from-lowest-point-in-2013-981573.html


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