Stringent conditions to switch mortgage

Q&A:Personal finance: your queries answered

Q

I have a variable-rate mortgage with ACCBank. I would like to switch to a fixed-rate from one of the big banks. Both lenders are seeking assurance of a guarantor as my wages and some rental income from the property are not enough to satisfy the stringent lending rules in place. Am I stuck with my ACCBank? Their fixed-rate is 1 per cent more than the banks for the same period of fixed-rate, so I will pay €4,000 more in interest. Is there a chance of a Government-backed scheme to guarantee private borrowers’ mortgages for cases like this? Should I hold tight or bite the bullet now with a five-year fix on my mortgage?

– Mr G D

A

If the banks to which you want to switch want a guarantor and you do not have such a backup, you probably are stuck with your current lender. Banks in general are “de-risking” at present, which means they are getting much tougher in the amounts they lend and the conditions that apply. It is unlikely that the Government will guarantee private borrowers mortgages in cases like this. Talk of State involvement has been in relation to mortgage holders unable to meet their payments and at risk of repossession – and even then there is no serious talk of such a scheme.

IS NOW A GOOD TIME TO CASH IN POLICY?

Q

I’ve paid into a Moneybuild policy with Hibernian Aviva since 1997. The full title is Aviva Irl TSB Bank Moneybuild Fund. The premium is over €90 a month and the life cover is around €1,000. I am concerned as I tried to get the value of the unit price on the internet, but no website was helpful. The €90-plus a month would come in handy for other things. Should I cash in the policy or stick with it? I receive a statement each year detailing the current value so why should Aviva be reluctant to show details on their websites.

– J, GALWAY

A

I’m never sure why institutions are so cagey about giving their customers the information they require to make their investment decisions. The Moneybuild fund has been doing alright over the past year, growing by about 16 per cent. So far this year, it is about 1 per cent down. But, over the longer term, the fund has not been so successful. Over the last three years, it has lost, on average, 11.2 per cent of its value annually. Over the five-year term, the markdown is 2.5 per cent per annum. Currently, the bid price is just under €7.90 with the offer price hovering just above €8.30. Should you cash it in? You wouldn’t be holding on to it for the life cover so decide, with a financial adviser, if the fund still meets your needs and if it is likely to grow in the longer term.

*Some weeks ago, we addressed the situation of a person buying a brother out of a property they were bequeathed jointly in a will. The issue was what taxes arose in such circumstances and I stated that stamp duty was the main liability facing the purchaser. Michael Dooley of Co Limerick accountants Dooley Byrne reminds me that because the two parties to the sale are related, the rate of stamp duty is half what it would normally be.

This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the column. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com