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Types of Mortgages
Repayment / Annuity Type Mortgage
This is the most common type of mortgage. The mortgage is repaid by monthly payments over a defined period of 10-35 years at a fixed or variable interest rate. In the early years most of the repayment is interest. As the mortgage term passes more capital is repaid. At the end of the mortgage period the mortgage has been repaid and the property belongs to the mortgage holder. Recent changes in EU banking legislation mean that it is now easier for borrowers to move from a fixed rate mortgage to a more favourable variable rate.
Interest Only Home Loans
As the name suggests only the interest element of an Interest Only Homeloan is repaid and the mortgage (capital) balance remains outstanding. Usually such loans will convert to capital and interest after an initial interest only term. Sometimes the loan will be repaid when a specified event takes place (e.g. sale of a property, when an investment matures etc.). Interest Only loans are not generally available at present, unless the method of repayment meets the bank’s criteria and is likely to be delivered on time or if sustainable reasons are given as to why capital and interest payments should be deferred at the outset.
With this type of mortgage instead of paying the capital element of the mortgage off with the regular mortgage payments, the borrower will make interest payments only on the mortgage. At the same time he or she will pay into a pension plan with a view to accumulating enough tax free capital on retirement to pay off the outstanding mortgage amount. This can be very tax efficient as the borrower claims tax relief on the amount contributed to the pension. It should be noted however, that there is no guarantee that the accumulated fund at retirement will be sufficient to pay out the tax-free lump sum required to clear the mortgage.
Residential Investment Property Loans
Mortgages for Residential Investment Properties (RIP’s or Buy-to-Let’s) can be arranged to assist in the cost of purchasing investment properties.
Commercial mortgages are available in respect of commercial properties – offices, licenced premises, hotels, farms or retail premises etc.
The Rebuilding Ireland home loan initiative is aimed at prospective homeowners who don’t qualify for social housing and have not been approved for a mortgage by the banks. The mortgages will be available to individual applicants whose annual gross income does not exceed €50,000 and to joint applicants who earn up to €75,000 and who are aged 18-70. CLICK HERE TO LEARN MORE >>