Welcome to “The Financial Column” in association with MoneyPlus, Bridge St., Boyle.
Today we will deal with two topical questions:
Q. I am planning on buying my first house in the next few months. Where is the best place to get a mortgage and what do need to do.
A. The best mortgage provider will depend on a number of factors, ie Loan to Value,(LTV), type of employment contract or permanent, location of property. Each provider has their own set of criteria and they vary. The best rate on the market at the moment for a typical 90% LTV mortgage of 135k is EBS @ 3.95% followed by AIB /Haven at 4.0%. However, other factors need to be taken into consideration, length of present employment, regular savings, rent & repayment capacity, credit history, when choosing a provider. There are also many introductory offers on the market, and you need to be careful if you are making your decision based on these.
You need to take the following steps now;
Set up a regular savings pattern for the equivalent per month of proposed mortgage repayments less any rent being paid at present
Ensure your rent is being paid by standing order from your bank account
Ensure your bank accounts are being operated satisfactorily, ie no unpaid or referral item fees. All loans are up to date.
Ensure you have at least 5% of deposit saved by regular savings
If property is costing up to 220k you will need a 10% deposit. Anything over that requires a 20% deposit.
At least 2 years audited accounts if self- employed.
Individual providers may have other requirements but these are the basics.
Purchasing your first home is a major life event, it is advisable to get independent impartial advice before making a decision on a mortgage provider.
Q: I have €30,000 on deposit in my bank. It is earning little or no interest and even if I tie it up for 12 months it will still earn less than 1%.
What do you advise I should do with it ?
A: This is an issue facing many deposit account holders at present. Interest rates are at an all time low and close to zero, regardless of the time you invest your money for. There is currently little prospect of deposit rates rising significantly in the short term, i.e. the next 12 – 18 months, and possibly, in the medium term, the next 2-3 years.
In addition, any deposit interest earned is subject to 41% DIRT so, even if you earned a rate of 1% over 12 months, the net return after tax is only 0.59%. In this instance the net interest (after tax) at the end of 12 months for a sum of €30,000 would be just €177.
What are the alternatives ?
In summary, the best way to determine the most suitable option(s) for you and for your surplus deposit is to sit down with an experienced and impartial financial adviser and go through the process outlined above to establish your particular objectives and arrive at a solution which suits your particular circumstances.
This involves finding out a number of things from you such as:
What is this money for and how does it relate to your overall personal financial circumstances ?
Do you need to have access to this money or are you prepared to invest some or all for a longer period of time to achieve a better return ? If so, how long and what flexibility do you need to access this money?
Do you have other investments/property/deposits etc.?
What investment experience have you had in the past, if any, and how did this work out ?
What are your investment objectives for this money?
What return would you like to achieve from this sum?
What risk, if any, are you prepared to take to try and achieve your targeted returns and how would this affect your overall financial position if you don’t achieve this?
As an example, if, on answering the above, your deposit money is surplus to your current needs and that you do not require access to this money for, say, up to 5 years, then our recommendation would be to for you to consider medium term investments, compatible with your risk and return objectives.
There are a number of investment products available in the market place, depending on your answers to the above, which may suit your circumstances, such as :
Post Office Savings Bonds.
Capital protected/partially protected investment/tracker bonds.
Unit-linked investment bonds, typically these can range from low risk, cautious investment funds, to risk controlled multi-asset funds, to specialist funds such as Equity and Property Funds.
If you have any financial questions you would like answered in this column please submit details in confidence to [email protected]
Money Plus are experienced investment and financial brokers and have been in the business of financial and investment planning for many years. They are dedicated in providing bespoke financial planning advice to clients. If you would like further advice on the above or any other financial information please contact Belinda McCauley in our Boyle office on Bridge Street on 071 9194000 or [email protected]
Boyletoday.com/MoneyPlus accept no responsibility for any decisions taken as a result of advice provided in this column. A reliable recommendation can only be made following a full detailed consultation taking an individual particular circumstances into consideration