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| Understanding mortgage terms |
Variable or floating rate
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This rate changes in response to the Central European Bank base rate which means it can rise and fall during the life of your mortgage.
Fixed rate
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This is where the rate of interest is fixed for a predetermined period of time. You can opt for a fixed rate which may have 1, 2, 3, 4, 5 or even a 10 year term. Fixed rate mortgages offer the comfort of knowing that your mortgage repayments won’t rise and will remain unchanged for the specific term of the fixed rate, be it one to ten years.
Fixed rates are preferable if you think the variable rate may move higher over the same period of time (or longer) than your chosen fixed rate term.
However, the downside to fixed rates is that if variable rates subsequently become more attractive and you are locked into a fixed rate it can be very expensive to switch back to a variable rate, depending on the lender and the contract you have signed.
Generally speaking, the further away from the end of the term you are, the more expensive it is to break the contract. Be aware that penalties can be as high as 6 months or repayments or even more. Make sure you read the small print on the contracts before signing anything.
Mortgage Protection Cover
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This is the life assurance policy that all lenders insist you take out when borrowing for a property. Essentially it means that the mortgage loan is paid off in the event of your death.
Annualised percentage rate
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The APR is the cost of the credit over the lifespan of the loan and covers the monthly repayments plus any additional costs incurred in taking out and having the mortgage on an ongoing basis. It is a good way of comparing the cost of a mortgage between various lending institutions.
Cost per thousand
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What we regard as the most important figure of all when considering taking out a mortgage with a mortgage agency. This is down to the brass tacks of what you actually repay per month. The cost per thousand is literally that.
If a lender is charging a typical rate of 5.67 euros for every one thousand euros borrowed, then it will cost 567 euros per month to borrow 100,000 euros. It is an excellent way of comparing the cost of borrowings from various lenders and we emphasise you get this figure from all the lending institutions you are inquiring into borrowing from. You will be surprised at the difference between some and it is the figure that counts in the long run……what you actually pay.
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