Mortgages

Introduction

A mortgage is usually the largest debt you will have and you will repay it over a long period of time, typically between 25 and 30 years. Over the life of your mortgage your personal circumstances and financial goals will change, the interest rates will vary and the amount of equity you have in your home will increase as you pay more of your loan back.

As your mortgage is the biggest financial commitment you have, you will need to manage your mortgage to get the best deal and to get through times of uncertainty. In the long term you might face decisions like whether you should pay off your mortgage or save for retirement.

In this module we hope to shed light on some of these issues. The good news is that there is a lot of useful information available and financial institutions are more than happy to discuss your particular needs. Before we start, lets take a look at who sets interest rates and the different interest rate options open to you.

What is?

> What is a Mortgage?
A Mortgage is a type of loan given to someone to purchase property.

> What is the minimum number of years?
5 years. However as a lender cannot refuse to accept full repayment of a loan balance at any time, you could agree a loan term of 5 years and clear it off after a couple of months, and the lender cannot charge you any fee, so the loan term could be only months.

> What is an interest rate?
Interest is the cost of borrowing money for a borrower. It is the reward earned by a lender for making the loan. Some people refer to interest as the "rent" you pay for using money.

> What is a variable interest rate?
A variable interest rate is one which will rise and fall generally in line with the rise and fall in general interest rates.

> What is a fixed rate?
A fixed rate, is a rate which the lender agrees to lend money at, for a period of time, for example a lender might agree to lend at a rate of 5% for 5 years, with the main loan term of 35 years.

> What is a tracker rate?
A tracker rate, is a rate which is linked to another rate of interest.

> To what rate are tracker rates tied?
Most tracker rates are tied to the ECB (European Central Bank) base lending rate, which is currently 1%. Due to the financial crisis, most if not all lenders have withdrawn tracker rate offers at this time.

> What is APR (Annual percentage Rate)?
The EU (European Union) formally the EEC issued a council directive, amending Directive 87/102/EEC on the 22nd of February 1990. Article 5 of Council Directive 87/102/EEC(4) provides for the introduction of a community method or methods of calculating the annual percentage rate of charge for consumer credit.

> What does "Annual percentage rate of charge" mean?
It means, "the total cost of the credit to the consumer, expressed as an annual percentage of the amount of the credit granted and calculated in accordance with Article 1a." Having read these notes on APR, you may be asking, Ok, but what does it really mean to you? well the short answer is, the lower the APR the better the deal over the term of the mortgage, so if you are deciding on a lender on the basis of price only, then pick the lender with the lowest APR for the same amount of money and term in years.

> What is Article 1a?
Article 1a, is a definition of the method of calculation. The method of calculation is incorporated into the Irish Consumer Credit Act 1995.

> What is a Mortgage Indemnity Guarantee?
A lender will buy a "Mortgage Indemnity Guarantee" insurance policy from an insurance company. The policy value will be for a percentage of the purchase price or value of the property, normally 20%.
Let us say you buy a property for €300,000 and you obtain a loan of 92%, for €276,000. The lender will buy a policy for €60,000 (20% of the PP). A year from now you lose your job and fall on hard times and you are unable to make the loan repayments. The Lender will take possession of the property, arrange for the property to be sold, on the open market, for the best price, usually by auction. Let us say the best price is, €260,000, the expenses incurred in the sale is €8,000, so the net proceeds are €252,000. The loan balance is standing at €270,000 so the lender is looking at a loss on the loan of €18,000. The lender will then make a claim on the "Mortgage Indemnity Guarantee" Policy. Which we know was bought for a value of €60,000. The lender suffers no loss on this non performing loan. There is a sting in the tail, the Insurance company reserve the right to make a claim against the borrower in the future, so as to re-coup the value of the claim paid to the original lender.You might be thinking, why is this important to me? Two reasons, firstly, if a claim is made on a policy taken out on a loan you borrowed, then the Insurance Company can seek to have you make up the cost. The second reason: If your lender has no such policies in place and suffers a large number of mortgage defaults, upon which it makes serious losses, then it is likely the lender will have to increase future interest rates to make up the losses, so you end up, paying up for the bad borrowers, therefore it might be better to deal with a lender who carries such loans insurance.

> What is the maximum term on offer from lenders?
Most lender will want to see a loan fully repaid before a borrower reaches age 70 years. We have already confirmed you must be 18 years of age to borrow money, therefore the maximum term could be 52 years. However, 35 year loan terms or up to 40 years are available.

> What is a family Home?
A simple definition of a family home, It is a house purchased by a couple, a Husband and Wife, for their own occupation as their principle place of residence.

The Basics

> Can a borrower transfer a mortgage from one lender to another?
Yes, though it may be expensive, that would depend on the amount of the loan and any savings to be made by making the transfer. Some lenders provide "Switcher packages" and will pay some or all the legal fees.

> Can a mortgage be transferred from one property to another property with the same lender?
No. Remember it is the borrower who grants a "mortgage charge" over their property to the lender in return for the loan. There are very strict controls exercised by both the Land Registry and the Registry of deeds in recording legal charges over property. You cannot transfer a mortgage debt, you would be required to register the repayment of one loan and note this with the Land Registry or Registry of Deeds, and then register a new loan on the new property.

> How much can be borrowed?
The maximum loan amount available today is up to 100% of the purchase price or value of the property, which ever is the less

> Can a borrower have more than one loan at the same time?
Yes! How much a borrower borrows will be dependent on the security and income considerations.

> Do I/you have to pay a broker fee?
No, all consultations are free of charge

> Can I apply for a mortgage before I identify a property?
Yes, in fact we have a special application called Prior Loan Approval Certificate, which allows prospective borrowers to engage in property negotiations in confidence, knowing how much they can borrow. These certificates have a shelf life of up to six months so you have plenty of time to find the Right House for you!

> How do I make an application?
Just phone 021 4305566 or 086 8333333 to make an appointment.

> How much of a deposit do I need?
For First Time Buyers, subject to terms and conditions, we can apply for up to 100% of the Purchase Price or the Value of the property offered as security (which ever is the lesser). For other home loan borrowers we would normally secure loan up to a maximum of 92%. For commercial borrowers the maximum loan to value would be by negotiation, but would not normally be more than 70%.

Interest Rates

> Who sets interest rates?
Irish mortgage rates are linked to the European Central Bank (ECB) rates. To encourage economic growth in the European Union, the ECB regularly changes interest rates. Tracker interest rates in Ireland then automatically change and lenders can pass on variable rate changes if they want to.

Where interest rates are concerned, it pays to be informed. Rises (and falls) in interest rates tend to be highlighted in the media. By keeping yourself informed, you can act quickly to save yourself money.

The cost of repaying your mortgage can vary greatly from lender to lender, and depends on the type of interest rate you choose. If you have a mortgage you should be aware of the types of interest rates available and the advantages and disadvantages of each interest rate package. It is also important to know how interest rates are calculated. With this knowledge you will be able to compare packages and make good decisions. Different interest rates apply depending on the type of mortgage and lender you choose.

> How would an interest rate increase affect your mortgage?
Lenders 'stress-test' mortgage applications to satisfy themselves that the borrower can continue to make payments if interest rates rise. When you are going through the approval process for your mortgage, the lender will test your mortgage repayments based on a 1 or 2 percent increase in interest rates.

> What rate of interest will be charged?
The rate of interest applied to a loan will depend on whether it is,

  • A Variable
  • A Fixed rate (for a period of time)
  • A Tracker

> Variable interest rates

  • Advantages:
  • The loan agreement is flexible
  • Extra payments can be made to the loan at anytime without penalty.
  • Lenders will try to give as much notice as possible before increasing the interest rate charged.
  • Lenders will try to reduce interest rates as quickly as possible.
  • Borrowers can repay the loan in full at any time without penalty.
  • Borrowers can increase their monthly repayments and reduce the term of the loan.
  • Disadvantages:
  • The monthly repayments will rise sometimes at short notice in line with a rise in general interest rates. Borrowers are not able to budget in confidence, as loan repayments can increase at short notice.

> Fixed interest rates

  • Advantages:
  • Borrowers can budget in confidence, for the duration of the fixed rate term.
  • Borrowers are protected, by having a fixed rate, from sudden increases in loan repayments following a rise in general interest rates.
  • Disadvantages:
  • If there is a reduction in general interest rates, borrowers in fixed rate contracts will not benefit from the reduction.
  • If a borrower wished to repay part or all of the loan outstanding, there will be a penalty charged. The extent of the charge will depend on the amount of the loan repaid and the term of the fixed contract, within the overall term of the mortgage.

> Tracker rates

  • Advantages:
  • Borrowers are able to make extra repayments and capital payments reduce the loan balance without incurring a penalty.
  • Borrowers are allowed to reduce the term of the loan without penalty.
  • When there is a reduction in general interest rates borrowers may benefit from reduced repayments.
  • Borrowers can repay the loan in full without penalty
  • Because the rate is tied to the ECB (European Central Bank) base lending rate, if the ECB reduce that rate a similar reduction in a borrowers interest rate must take place, normally within 5 working days
  • Disadvantages:
  • When the ECB (European central Bank) increase their base lending rate, the mortgage interest rate must increase by the same amount, normally within 5 working days.
  • There may be times when lenders may not increase their variable interest rate in line with an increase in the ECB's base lending rate.
  • Budgeting is more difficult.

Have a financial plan.

In all personal financial matters, it pays to have a plan. The level of your mortgage repayments is just one factor among many to consider. Your financial goals will depend on your stage in life, but if like many people you find your mortgage repayments take up a large part of your take home pay, it is worth including your mortgage in any plan you make.

Managing a mortgage is all about keeping a close eye on cash flow. Ultimately, you will want to be free of your mortgage, certainly by the time of your retirement, so it pays to be informed.

> Paying off your mortgage.
Suppose you find yourself in a position where you have more money to spend each month, or you acquire a lump sum. Increasing the monthly repayments on your loan or indeed reducing the value of your loan with your lump sum makes good financial sense, as you will be reducing the cost of the mortgage in the long run.  You should also explore other options. By paying off your mortgage or increasing your mortgage payments, you may be denying yourself the opportunity to invest in other assets.

Although you are saving interest on your mortgage payments, you might also be missing out on a good investment opportunity, such as a pension.

So, while you might save, for example 4% on your mortgage interest, your investment might have yielded a greater amount, in which case you are effectively losing money.

Tip!
If you have a short-term cash surplus, you should consider paying off your short-term debt rather than your mortgage. Short-term debt such as credit cards, term loans and overdrafts is more expensive than a mortgage as interest rates are higher.

Your mortgage term affects the amount of your repayments. The shorter your mortgage, the higher your monthly repayments but the longer the term, the lower your monthly repayments. Mortgage repayments include principal (the original loan amount) and interest on that principal.

The longer you spread out your mortgage payments, the less principal you will have to pay back each month. The downside is that because the loan is longer, you will be paying interest for a longer period. This means that your overall interest payments will be higher. So decreasing your term and increasing your monthly repayments will reduce the interest you pay over your entire loan.

Knowing more about mortgages will help you to make informed decisions. Don't be afraid of increasing interest rates - contact your financial advisor and they will provide you with some options on how you can manage the rate change in the medium term.


If you want to pay off your mortgage early, then you can increase your monthly payments, make lump sum instalments or reduce your term. Remember, always balance paying off your mortgage early with your other financial goals.

Insurance

> What happens if a borrower dies during the loan term?
In most cases the borrower (s) will have taken out a suitable Life Assurance Protection Policy. What happens if the property is destroyed in some way, by fire for example? A Buildings insurance policy will have been put in place to protect the interest of the lender and borrower. If the property is destroyed the insurance policy would pay for its replacement.

> Can I insure my house contents?
Yes! You may insure your contents as part of the buildings policy or by using a stand alone contents policy.

> What other products must a borrower buy when they mortgage their property?
A Life Assurance Protection Policy, If the property offered as security for the loan is the borrowers principle private residence, the borrower must buy at a minimum, a Death benefit policy. commonly called "Mortgage Protection Policy". In the event of early death, before the loan term has been completed, the lender or survivor will make a claim on the policy and use the proceeds to repay the outstanding balance. Unless there is some reason such a policy is not available due to the ill health of the borrower then a lender may decide to proceed with the loan on the basis of a signed waiver of life protection from the borrower. Many advisers would recommend borrowers to purchase not only death benefit for the value of the loan, but serious illness cover also, to provide the additional peace of mind from knowing that the loan balance would be cleared in the event of contracting or suffering some serious illness during the loan term. Buildings Insurance policy must be put into effect to cover the cost of replacing the building in the event of destruction or damage.

> Are there any other products which a borrower would be advisable to buy?
Most lenders provide repayment protection policies, to provide borrowers protection in the event of temporary loss of income, due to accident, illness or loss of employment (redundancy). Cover can be provided for the value of the loan repayment, for periods between 12 months, 24 months and may even include some level of serious illness cover.

Terms and Conditions

> What sort of property can be bought with a mortgage loan?
Any property for which there are title documents, which the owner can give to the lender as security for the loan.

> What conditions must a borrower satisfy to get a 100% loan?
Most lenders have their own set of conditions. The following are the conditions typically set by lenders:

  1. First Time Buyer for a single application or at least one FTB in a joint application.
  2. Must be a loan to buy borrowers Principle Private Residence
  3. Maximum loan to value (LTV) 100%
  4. Applicants must have a minimum of 12 months continuous employment history, no probationary periods allowed.
  5. 12 months interest only loan available with the EBS Self Build product, during the first 12 months construction period.
  6. Only one property per member
  7. No "Site Purchase Only" loans
  8. Minimum age : 21 years
  9. Minimum Loan amount ͠110,000
  10. Maximum loan ͠500,000 in Dublin area, ͠350,000 in the rest of the country
  11. Loans requiring Guarantor assistance will be considered
  12. At least one applicant to be resident in the property
  13. Both new and Secondhand property considered

> What if the borrower cannot satisfy these conditions?
Most lenders will lend up to 92% of the purchase price or valuation of a property which ever is the lesser amount.

> What conditions must a borrower satisfy in order to qualify for a loan of up to 92%?
When a lender assesses a loan application, the following conditions will need to be satisfied:

  1. The borrower(s) must be 18 years or over.
  2. The borrower(s) will need to provide the lender with details of income from all sources. This enables the lender to calculate borrowers repayment capacity.
  3. The borrower (s) will need to show they have a good credit history, if they had borrowed money previously.

> Are there any categories of person to whom a lender cannot lend?
Yes

  • A lender cannot lend to a declared bankrupt
  • A lender cannot lend to a minor, (a person of age less than 18 years)
  • A lender cannot lend to person of unsound mind

> Do lenders operate income restrictions?
Lenders will apply rules to the incomes of borrowers to assess their repayment capacity.

> Are their any restrictions on the number of persons who can make a joint application?
Not really, but if there were a large number of borrowers, it might be better to form some sort of consortium or property partnership and borrow in that name.

> Can you pay a loan off earlier than agreed at the outset?
Yes

First Time Buyers

One might expect this group would be easly identified, but there are different types of first time buyer and each is treated differently

Most people would consider a first time buyer:

  • To be a person, often quite young, borrowing money for the first time to buy their first house, but the following persons can (in cirtain circumstances) also be considered a first time buyer
  • A person who acquired a property through inheritance, who may subsequently sell that property and buy another or may simply raise a mortgage loan on the inherited property to carry out improvements, would be classified by the revenue as a First Time Buyer.
  • When a married couple become legally separated or divorced and they sell their family home as part of the settlement, they can apply to the tax office to be considered First Time Buyers, if they buy another property to live in as their principle private residence.

This is very important and can be very tax efficient, re classification can have significant tax implications.


Tax implications:

There are two taxes to consider:

1) Income Tax Relief:

First Time buyers are allowed to claim tax relief as follows:

  • For the tax year in which the mortgage is drawndown and year 2, relief at 25% of the interest charged
  • Years 3, 4 and 5 at 22.5%, limits as above
  • Years 6 and 7 at 20%, limits as above

2) Interest limits:

  • Single applicants up to a Maximum of €10,000
  • A married couple up to €20,000

Example:
Taking a loan of say €500,000, (issued to a couple of first time buyers), at a rate of 4% APR, the interest cost in year one would be €20,000, which is the maximum interest for which tax relief is allowed, and relief will be given at 25% which comes to €5,000 for the tax year.
At the end of the 7th tax year, interest relief is no longer allowed. If a first time buyer, switches provider within the 7 tax years, relief will be allowed on the basis of the rules stated above, for the remainder of the 7 tax years from the year in which the mortgage was taken out.


Tax Relief Warning
There is an important point I wish to make at this time regarding taking a mortgage for the first time.

Example:
Let us say you are a first time buyer, and the loan you take is €300,000 over 35 years and at a fixed rate of 3% for 7 years and the loan is interest only. The loan is completed on the 1st December 2009.
The interest charged in the 2009 tax year is €300,000 X 3% divided by 12 = €750 @25% tax relief, the relief earned is therefore €187.50 for that 1st tax year. You would then get tax relief on €9,000 for the next 6 tax years.
If the mortgage completion was delayed for 1 month, to 1st January 2010, then the tax relief for the first tax year would be €9000 @ 25% = €2250, and get the same tax relief for the following 6 tax years, giving you a tax relief gain of €2062.50.

The above is an example of the gain to be made or the loss to be suffered by completing your mortgage at different times in the tax year.


Non First Time Buyers
If a borrower has had a mortgage for more than 7 years, they no longer receive any tax relief on that loan, However, if they take a new loan to improve the existing home or take a new loan because they sell the first house and buy another, the new loan will qualify for tax relief for 7 tax years from the year the loan was taken out.
The maximum interest allowance reduces to €3,000 for a single borrower, and €6,000 for a married couple, the rate of relief is 15%. You can see from the above how important it is for a separated or divorsed person to apply for re-classification as a First Time Buyer, when buying a new home after seperation.


Additional Information
For a very comprehensive explanation of the new tax relief rules, please vist www.revenue.ie where you will find loads of questions and answers, and examples


Stamp Duty
Re-classification as a First Time Buyer also means a borrower who was an existing borrower and home owner can after separation or divorce purchase a second hand property with the same exemptions as other First Time Buyers. The purchase will be exempt from stamp duty for both new or existing stock, however if the property is let out as a residential investment property within 5 years then a stamp duty charge will arise. For further details you will need to seek specialist tax advice from a suitably qualified person.


Over the past few years lenders have woken up and recognized the benefits of capturing First Time Buyers, as they offer the opportunity of future business when the first time buyer decides to trade up.
There are a number of First Time Buyer packages on offer. While 100% Mortgages, were made available to some borrowers in the past, the financial crisis and property value correction which has taken place in recent years has resulted in these 100% loans been removed from the market, except for first time buyers who qualify for an affordable home. If you are a first time buyer, you may be able to borrow up to 100% of the Purchase Price, but no more than 80% of the Value as certified by the lenders valuer, which ever is the lesser.

Trading Investors

This is a very much easier group to describe.

They are existing home oweners who decide to sell up and buy a larger house or a similar house in a better location. The important point is that in most cases trader uppers are spending more on the new house than they are selling the existing home for. This is an important borrowing opportuinty as borrowers can take a closer look at the packages on offer.

Property Investors

This classification can be broken down into two groups.
1. The commercial property investor will have an eye out for a suitably located commercial premises to let out to a business on a commercial lease usually the lease will be FRI* with upwards only rent reviews.

2. The residential property investor concentrates on residential property, buying property to let our to one or more tenants, sometimes a group of people sharing a house or a family. In recent times the passing of the Landlord and Tenant act of 2003, has increased the responsibilities for both Landlord and Tenant alike, the most important of which for tenants is the right to a 4 year 6 month tenancy after completing a satisfactory first 6 months. This is a specialist area and First Mortgage advises property investors to consult their legal adviser before buying a property for investment purposes.



*FRI - Full Repairing and Insuring:
This means the tenant is responsible for all repairs to the premises and also for putting in place a building insurance policy to protect the owners property in the event of damage caused by fire, storm and escape of water among other perils.

Equity Release

The value of a property less the amount of the mortgage left to pay is known as "Equity". For example, a property with a market value of EUR400,000 and a mortgage of EUR100,000 left to pay, has equity of EUR300,000. The greater the level of equity in the property, the more comfortable you should feel, because you own more of your home.

The lower the amount you borrow in relation to the value of the property, the stronger your financial position. The amount borrowed in relation to the value of your house is known as the loan-to-value (LTV) ratio. So, for example, a property worth EUR400,000 with a EUR100,000 loan outstanding has a 25% loan-to-value ratio.

If you need to borrow more money for home improvements, or for some other reason, it is easier if you have more equity in your home.



> There are two types of equity release borrower:

Type 1

In recent years with the rapid increase in the value of Irish property, owners have been encouraged to re-mortgage their property to raise further cash, to invest in additional residential or commercial property here in Ireland or abroad. This allows the investor to build a larger property portfolio.

Over time the value of a property may increase while at the same time the debt on the property is being repaid, so the owners stake (equity) in the property increases.

If at a later stage that property owner wishes to make another purchase, he may wish to raise 100% or even 110 % of the purchase price, to cover additional expenses. This can be done by raising a loan of say 90% of the purchase price or value of the new property, which ever is the lesser, with the new property as security for that loan.They would then obtain a top up loan usually a second loan secured on the existing property, to make up the other 10% or 20 % to allow for the payment of fees and expenses. In this way the borrower is releasing the equity in the first property, to help finance the new purchase.


Type 2

This type of borrower, might be an older person or persons, with a low income living in a large and very valuable property, for example many family homes in Dublin city would have a value in excess of €1,000,000 and the owners mortgage might be long paid off. You can’t take the property with you, so a home owner might take an equity release mortgage from a provider on the following basis:

  • They make no repayments during their remaining life time, but the value of the debt will rise as the years pass.
  • When the surviving owner passes away the debt will be repaid from the sale proceeds of the property.

There are terms and conditions and First Mortgage advises intending borrowers to consult with a professional adviser before signing up for such loans.

Switching Lenders

This is the most recent type of borrower. These borrowers generally become unhappy with an existing provider and decide to switch lender. In some cases these borrowers will increase their debt to incorporate or consolidate a number of different loans into one larger loan to be repaid over a longer term. This often reduces the monthly repayment burden and eases the borrowers cash flow.

Some lenders are offering enducements such as offering to pay the legal fees associated with moving the existing mortgage from one lender to a new lender. As always, there are terms and conditions.

> Why should I move accounts?
Everybody knows you get best value from shopping around. Exactly the same applies to financial services. Then, why do customers rarely change bank accounts, whether current account or mortgage account? This is strange given that you can make great savings.

Many consumers dread the idea of changing current accounts, believing that the effort involved far outweighs the benefits. There is also a belief that financial institutions don't make things easy for customers who want to move elsewhere. Whether this is true or not it is becoming progressively easier for customers to change banks.

> Changing mortgage provider
Your home is probably the largest single investment you will ever make. Mortgage terms can last up to 35 years, so getting the best deal can save you thousands in interest over the lifetime of the mortgage.

Buying a home is a long-term commitment but you don't have any such commitment to your mortgage provider. Check that you are getting a good deal by looking at:

  • The rate offered: while some providers may offer discounted rates for new business, this may be at the expense of existing customers. So, when you look at a cheap fixed rate, you should also look at the competitiveness of the variable rate for when you eventually come off the fixed rate.
  • The reputation of the provider: find out whether in the past it has passed on rate cuts/hikes to its customers and what percentage of the cut/hike it has passed on.
  • The value of the other services provided: take into account the other services,products and experience that the provider offers.
If you decide that you want to move, the procedure for moving mortgage account differs slightly depending on whether your mortgage is a variable or fixed rate mortgage.

> Variable interest rates
Variable rate mortgages are relatively easy to change. You need to calculate the saving to be made from the new rate and compare it with the cost of switching your mortgage. In addition this cost includes solicitor and valuer fees, which can amount to over EUR1,000. Some lenders, however, are prepared to subsidise these costs in order to entice you to switch your mortgage.

> Fixed interest rates
Fixed rate mortgages are more problematic. Breaking a fixed rate contract usually triggers a penalty. The reason for this penalty is that lenders incur a cost to provide a fixed rate to you. If this fixed rate is broken the lender will look to get back that cost in the form of a penalty fee. As a result, switching providers may not be worthwhile.

Currently, there is no single standard way that lenders calculate the penalty fee but it is not unusual for a penalty of up to six months' interest on the outstanding amount of your mortgage. When switching a mortgage there are also additional costs, such as legal fees and valuation fees. If you are considering switching, ask your new mortgage provider if they will cover these costs, but it's highly unlikely that they will pay the interest penalty for you.

> Times of uncertainty.

How did you get on with the mortgage interest rate calculator? Could you weather the storm of increasing interest rates?

When faced with rising interest rates there are a number of things you can consider to help you through the situation:
  1. Review your household budget and see if you can reduce some of your spending on things that you don't need in the short term. Don't cut back on the essentials but do cut back on the luxuries if you need to.
  2. Hold off borrowing more for buying costly items until you are used to the new repayment. It is not a good idea to borrow more money (especially on your credit card) to get you through problems paying your mortgage.
  3. Speak to your financial advisor about your mortgage. You may be able to fix your mortgage interest rate for a few years to provide ertainty around your expenses and help you plan, or increase the term of your loan to lower repayments) in the short term to help you get through a difficult patch. Remember, the longer your mortgage is, the more interest you will pay.
If you would like to talk to an independent body about your finances, you can contact Money Advice and Budgeting Service (MABS),. They are a free and confidential service who can help you with budgeting and managing your debt. For more information, log onto www.mabs.ie. No matter what you choose, the important thing is that you don't ignore the situation. Your bank or building society should be happy to discuss your own situation and help you make the best decision for you.

Over the life of your mortgage you are likely to experience some of life's ups and downs. Perhaps you will get married or have children, have to care for a sick relative, or you may lose your job. As your mortgage is a long-term commitment you need to consider how you would manage these issues and stay financially healthy.

Payment protection is another option for cutting down uncertainty. A mortgage payment protection plan is an insurance policy designed to meet your mortgage repayments if you lose your job or become ill.

Tip!
An income protection plan works the same way but provides you with an income in the event of unemployment or illness.