Is it worth my while fix­ing my mort­gage term for 10 years?

Irish Independent - - Markets | Business - Char­lie We­ston Your Ques­tions

QI WANT to do some per­sonal fi­nan­cial ad­min­is­tra­tion. I thought I’d start with re­assess­ing my mort­gage sit­u­a­tion be­cause it is our sin­gle big­gest monthly bill. I’m 16 months into a three-year fixed rate of 4.2pc. But should I even bother look­ing at this? Do I just have to wait un­til my rate term is up? Ev­ery­one’s talk­ing about great long fixed rates, of up to 10 years even. Would it not be mad­ness to lock into some­thing for so long? A

YOU are not nec­es­sar­ily mar­ried to a bank just be­cause you are in a fixed rate. Call your bank and ask about the break­age fee, if any, that ap­plies if you were to re­deem or switch your mort­gage.

Gen­er­ally, banks are of­fer­ing lower fixed in­ter­est rates than vari­able rates be­cause they are try­ing to in­cen­tivise bor­row­ers to tie in with them for a num­ber of years. There is a risk in en­ter­ing into a longterm fixed rate, as in­ter­est rates may fall. How­ever, there is ar­guably more risk with a shorter-term fixed rate, as no­body knows what in­ter­est rates will be avail­able when you are ex­it­ing this rate.

It de­pends your own sit­u­a­tion. You need to con­sider whether you think you might be in a po­si­tion to in­crease your monthly pay­ments or pay an ad­di­tional lump sum on your mort­gage over the next 10 years as there may or may not be a penalty for this.

A fixed rate will give you the peace of mind of know­ing ex­actly what you will pay over a spe­cific pe­riod of time and you can bud­get ac­cord­ingly. For some peo­ple this cer­tainty is a valu­able ben­e­fit. You should take ex­pert ad­vice on this – per­haps a shorter fixed-rate term would­be­bet­ter­foryou?Asy­ousay,a mort­gage is your big­gest monthly ex­pen­di­ture, so any de­ci­sion you make around it should be given very care­ful con­sid­er­a­tion.

Pe­ri­od­i­cally re­view­ing your mort­gage, your mort­gage pro­tec­tion and all your other fi­nan­cial prod­ucts will save you money in the long run, so sched­ule an an­nual fi­nan­cial health check to see where sav­ings can be made.

Q

I RE­CENTLY ren­o­vated my prop­erty and I was ad­vised by my builder to re­place my ex­ist­ing tiled roof with metal cladding. It has a life­time guar­an­tee. Do I need to tell my in­sur­ers I have made this change? A Yes, you would need to ad­vise your in­sur­ers of the change to your prop­erty even if the roof comes with a life­time guar­an­tee. Any non-stan­dard con­struc­tion, like felt on tim­ber, metal cladding, or cor­ru­gated iron, would need to be dis­closed, ac­cord­ing to Deirdre McCarthy of In­sureMyHouse. ie. All in­sur­ers would have dif­fer­ent cri­te­ria in re­la­tion to the per­cent­age of non-stan­dard con­struc­tion they would be will­ing to quote on. In this case there would be a num­ber of in­sur­ers who would quote on 100pc metal cladding roof, so don’t worry if you are cur­rently with a com­pany that says this type of risk would not be ac­cept­able. There are many in­sur­ers on the mar­ket who spe­cialise in non-stan­dard houses.

It is im­por­tant to re­mem­ber to al­ways dis­close the in­for­ma­tion to your in­sur­ers as the last thing you want is a claim to be de­clined be­cause you for­got to tell the in­sur­ers that you had made changes to your prop­erty.

Q

MY mother (72) was wid­owed last year, and in re­cent months has de­cided to get back on the road af­ter a lull of 20 years. She has done her the­ory test, re­cently got her learner’s per­mit, and has her driv­ing test booked for three months’ time. She is look­ing at in­sur­ance for the 2010 Ford Fo­cus that my dad used to drive, but has been in dis­be­lief at some of the quotes she’s been given, even with the in­sur­ers they were with for years. What’s the best way to re­duce her premium?

A

THE most im­por­tant thing to do on her be­half is to shop around for quotes. Most older con­sumers are less likely to shop around. This is mostly down to fear of change and/or a sense of loy­alty to their cur­rent provider. Stick­ing with the same in­surer will by no means guar­an­tee you the best deal, ac­cord­ing to man­ag­ing di­rec­tor of In­sureMyCars. ie Jonathan He­hir. It can be of­ten be a case of quite the op­po­site. His ad­vice is to use a bro­ker. An­other idea is to con­sider a lower an­nual mileage pol­icy, de­pend­ing on her cir­cum­stances. Agree­ing to re­strict the dis­tance a per­son drives can help to lower costs, as in­sur­ers equate lower mileage to less risk. Adding a named driver to the pol­icy is also a good tac­tic for re­duc­ing pre­mi­ums, and one that is of­ten over­looked by mo­torists. It’s im­por­tant to en­sure that the per­son added to the pol­icy has a clean li­cence, or cleaner, than the driver, but do­ing so can amount to a dis­count of up to 20pc with some in­sur­ers.

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