Vigilance will cut the cost of your mortgage

Like people, the financial arrangements that facilitate property purchases will require regular attention if they are to thrive and remain efficient throughout their lifetime.

Given their size, it is not surprising that mortgages will merit a bit more attention than other property-related products such as insurance. In fact, a bit of care and attention to the mortgage can lead naturally to other financial benefits without very much effort on the home-owner's behalf.

When it comes to being attentive to a mortgage, a couple of "trouble spots" will always stand out, with the interest rate probably the most significant.

As any mortgage-hunter or holder will know, interest rates can vary substantially between lenders, or even within a given lender's portfolio of products. The rate that will apply will depend on two main drivers: the amount borrowed and the mortgage structure that is chosen.

The mortgage structure is the most significant input here, with the range in rates on offer at a lender such as AIB illustrating this with clarity.

A quick check on AIB's website earlier this week shows that some mortgage-holders with the institution could be paying a 5.07 per cent interest rate while others could be paying as little as 2.99 per cent.

The differential is easy to explain, with the highest rate levied on AIB's 10-year fixed loan (long-term fixes are expensive because of the "risk" they carry for the lender and the "reassurance" they bring for the borrower) and the lowest levied on one of the lender's newer, more competitive tracker products.

Trackers represent quite a recent phenomenon on the Irish market and, as such, may not be at the top of every mortgage-holder's radar. This is a mistake, with this type of product - where the interest rate promises to track the main ECB rate for its lifetime - offering a prime example of where a bit of loving care can make a real financial difference.

Take AIB's tracker rates, for example. If the loan represents less than 60 per cent of the property's value, the applicable rate is 2.99 per cent. If the loan-to-value ratio is more than 60 per cent, this rate then climbs, to 3.1 or 3.3 per cent, depending on the actual monetary value of the loan.

The trick for tracker-holders is to keep an eye on their loan-to-value at all times and, as soon as it slips below 60 per cent, to push their lender for the cheaper rate.

Some lenders will offer to apply the lower rate automatically, but it will always be worth making sure that it is done, just in case of "forgetfulness".

The monetary effect of a failure to move could be substantial, with the difference in monthly repayments on a 20-year mortgage of €200,000 at the 3.3 and 2.99 per cent rates coming out at about €30. That's about €360 in a whole year, or the price of a nice weekend away in the country.

And that wouldn't be the end of the savings either. A lower mortgage, whether it has been paid down over time or in a lump sum, should also translate into cheaper term life assurance.

This insurance is basically taken out for the lender, since it ensures the mortgage is paid off should the holder pass away before the end of the term. It is priced according to the monetary value of the mortgages. This means that, as soon as your mortgage drops substantially in value, you should seek new insurance quotes to reflect the new level.