Does cashback schemes offer the best mortgage deals?

By April 5, 2018Articles
With significantly low rates on many new mortgages, many lenders are offering cashbacks to stand out from the competition. This is the current situation in Ireland. The cashback mortgage deal was introduced by the Bank of Ireland and was later adopted by all major lenders. However, the real question is whether or not cashback offers lead to the best mortgage deals.

There are two types of cash back mortgage deals

A cash back mortgage is a scheme where an applicant is paid a cash lump sum on completion of the mortgage. As there are several categories of buyers in a mortgage market, there are different rules and criteria as well. The buyers include first-time buyers, non-first-time buyers, investors or switchers. There are two types of cashback mortgage deals – variable rate mortgage and fixed rate mortgage.

Allied Irish Banks (AIB) were offering variable rates at between 2.75% and 3.15%, depending on loan-to-values from lower interest rate of 50% and higher interest rate of 10%. On the other hand, KBC Bank and Bank of Ireland offered three-year fixed rates at between 2.95% and 3.10% and five-year fixed rates at between 3% and 3.35%.

First-time buyers are part of the current mortgage market in Ireland

The current mortgage market in Ireland is made up of first-time buyers. They are in a better position than non-first-time buyers because they have to pay only a 10% deposit of the purchase price while the latter have to pay 20%. First-time buyers are recommended to choose AIB for variable rates and KBC and Bank of Ireland for fixed rates.

Consider interest rates first

Whether you are a first-time buyer, a non-first-time buyer, an investor or are looking to switch your mortgage from another lender, it is important that you choose the best schemes to suit your specific needs and budget. Select the best interest rates before cashback offers. Even though cashback deals may appear enticing in the beginning, you could end up paying more for a higher mortgage rate. By considering interest rates and the overall cost of credit, you can eliminate the risks of paying higher rates in the future.

The amount of mortgage is important

Another factor that influences the choice of bank is the amount of mortgage you can get. While there is a fixed rate of three and a half times joint earnings, the amount can be higher, depending on the banks. However, the rates for investors is 1% to 1.5% higher than other categories of borrowers. Finally, the amount the lender is willing to offer will, of course, depend on how much you can pay back each month.

Is it a good choice to switch mortgage lenders?

Many customers would be tempted to switch banks if they find better mortgage deals or interest rates. Nevertheless, it is not always the first option. Before you decide to switch lenders, approach your bank and negotiate for a better rate. When the price of houses increases, banks are compelled to offer lower rates. There are a lot of people who have managed to get the best interest rates and mortgage deals by talking to their own banks. Besides, switching banks involve innumerable costs such as legal and evaluation fees. On the other hand, many banks offer cash backs to new customers when they switch.

Ultimately, finding the right banks and the best mortgage deals must be backed with a little background research. Many websites including the Competition and Consumer Protection Commission website provide valuable information about mortgage deals and loan schemes. Furthermore, you can always speak to an advisor so as to get the maximum information.

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