High Value Green Mortgage Fix length

[sharonarrives]

Have gotten approved for Bank of Irelands HVGM and was debating the length of the Mortgage.

I seen you can get a great rate of 2.15% for 4 years, or else 2.5% for 7 years fixed.

What’s everyone’s opinion on the better but shorter rate vs the slightly higher but longer term 7 year term. What are interest rates likely to look like 4 years from now?

I’m inclined to go with the e 4 years at 2.15% but am not 100% sure what to do.

 

[amelia1]

@sharonarrives My entirely personal opinion is that the longer term is a better option.

With the four-year, you save a little, but not much in relative terms - and you're exposed to interest rate changes three years early. Conversely, the seven-year rate is quite close to the four-year, and will stay stable for three extra years. And rates are currently as low as they're likely to be for the foreseeable future - in four years, rates would need to be hovering around 2.8 or lower to make the shorter term shake out in your favour.

 

[ecsid]

@sharonarrives Calculate out the total cost of a seven year term under either mortgage and a variety of different variable rate scenarios for the three variable years of you were to pick the 4.

Assuming any of those scenarios can happen, choose the term/rate that you can live with. That is, know the 'most upside' and 'most downside' of the two scenarios at an explicit euro value.

 

[kinzie]

@ecsid

for the three variable years of you were to pick the 4

What? Surely after the 4 years were up, they would fix their mortgage again? The variable rate should not really be considered here tbh.

To me, this is the problem OP is tasked with: After 4 years, will they be able to fix for less than 2.5%? It is difficult to say.

I myself choose the 7 year BOI recently. But it is difficult to know.

 

[shawnee77]

@kinzie

What? Surely after the 4 years were up, they would fix their mortgage again? The variable rate should not really be considered here tbh.

I would agree that assuming a variable rate for those three years might be naive, but so would assuming a fix for that time. Our perceptions of the automatic value of fixed rates are a bit strange at the moment because historical trends of variable rates generally being lower than fixed have been bucked in the past decade or so.

 

[ecsid]

@kinzie The variable rate still benchmarks where the fixed rates will be. If your model is 'fix again' then you use that number plus some fixed cost.

 

[healme2016]

@sharonarrives You should compare the cost to switch your mortgage with the difference of .35% for 3 years. In most cases, the cost and hassle isn’t worth it. Go with the longer term.

 

[thedavedave]

@sharonarrives We just got the 2.5% for 7 years. The longer term definitely seemed better value for us.

 

[ozarkdaisy]

@sharonarrives Personally I'd go with the longer term option just for peace of mind. Is there Cashback for either option? That would be something that might change my mind

 

[sharonarrives]

@ozarkdaisy Nope, both just the set reduced interest rate

 

[ozarkdaisy]

@sharonarrives Considering the current economic environment no one knows how high rates will go and over what period. Personally I'd take the longer term rate to let this period of rate rises run its course.

 

[inmaniac]

@sharonarrives Fixed for 10 years at 2.79% with same lender last year. Very happy with that. Could have gotten lower rate for a shorter duration elsewhere but the difference would have been very small in cost and hassle of switching too much.

 

[maninchrist96]

@sharonarrives I’m exactly in the same boat. I initially was going for the 4 years term. I wasn’t aware until reading this thread that there is a fee to switching plans? If that’s the case fixing it for 7 years makes more sense.

 

[maxb8070]

@sharonarrives Check the APRC%. That’s where the likes of Avant we’re saving people greater amounts over longer terms. Irish banks rarely advertise it.