- January 8, 2020
- Bob Quinn
- Financial Planning
AIB has introduced a ‘Green’ mortgage whereby they will offer a 5-year fixed rate of 2.5% if you are buying (or building) a home with an energy rating of B3 or higher. With variable rates starting at 3.15%, this Green mortgage is worth looking at if you meet the criteria.
You don’t have to switch to save
AIB’s Green mortgage is for new customers only, but you may be able to save even if you stay with your lender. Here’s why: your mortgage interest rate was based on a certain loan-to-value ratio (LTV), how much you borrowed as a proportion of the market value of the house. After ten years of making repayments, your loan-to-value ratio should be lower because you now owe less. In addition, the value of the house may have increased. So, have your home valued and you should be able to negotiate a better rate.
This may go against conventional wisdom…
I’m often asked by people who’ve received a windfall or lump sum if they should use it to pay off the mortgage. My response is, “It depends, but usually not”. There’s a certain emotional or psychological attraction to owning one’s own home outright, but I have good reasons for suggesting that you listen to your head on this one.
You see your mortgage is cheap debt, particularly if you’re lucky enough to have a tracker mortgage, so assuming you’re not struggling to pay it and can cover all your usual outgoings, don’t pay down or even reduce it with that windfall. Now, I’m not saying you should fritter it away either! If there are any other parts of the financial jigsaw puzzle in need of beefing up – your retirement, your children’s education or future-proofing your home, for example – that’s where the money should go.
If you’d like to get in touch to discuss, please schedule a time here.