permanent tsb bank has announced details of a new mortgage initiative to facilitate (1) customers with tracker home mortgages and (2) customers in negative equity to trade up or down from their current homes. Currently many of these customers are effectively excluded from the mortgage market because they don’t want to relinquish a tracker interest rate mortgage or because they are in negative equity and cannot finance the negative equity part of their mortgage to buy a new family home.
permanent tsb customers can start making inquiries and appointments with their permanent tsb branch to discuss the new initiative from today. The new products will be formally available from early May. Full details including terms and conditions are available here.
Until now, permanent tsb customers on a tracker interest rate could not avail of a tracker interest rate if they sold their house and bought a new one. They were obliged to terminate their existing tracker mortgage and finance their new property through the bank’s new mortgage business rates. permanent tsb bank recognises that this policy is restricting customers from moving house or trading up or down.
Under this new initiative customers with tracker interest rates will be able to avail of a tracker interest rate to finance a new mortgage. The new tracker interest rate will continue for the full term outstanding on their current tracker mortgage. The new rate will have an additional margin of 1% above their current tracker interest rate. Where the new tracker portability mortgage amount does not cover the full purchase price of the new property, new mortgage business rates will apply to any additional borrowings.
The move is a significant development in the mortgage market in Ireland. While some banks allow customers to continue their tracker mortgage (with an increased margin) for a limited period of time before the mortgage becomes a variable rate mortgage, permanent tsb is the only bank to allow them to avail of a tracker interest rate for the rest of its scheduled term.
Under the new initiative, permanent tsb will also enable qualifying customers in negative equity to sell their existing home and buy a new house by transferring the negative equity on the former property to their new home. Limits will apply to the amount that customers who are in negative equity may borrow in the event of trading down or trading up (175% and 125% respectively of the value of their new family home).
Jeremy Masding, Group Chief Executive of permanent tsb bank said;
This is a breakthrough initiative designed to open up the mortgage market for a segment of customers who have been effectively excluded for the past five years. It reflects our determination to find solutions that can help the market function better and that are fair to both customer and bank.
The new products are subject to terms and conditions including credit approval.
The new product could cost customers significantly less than they would have to pay if they were to move their entire borrowings to a variable rate mortgage. For permanent tsb the new product means the losses the bank currently experiences on their tracker product are reduced because the margin over the ECB rate is increased.
This new initiative could have significant financial benefits for qualifying customers. For example, customers in negative equity could save €125,000 with an outstanding mortgage balance of €318,000 with a 25 year term left on their tracker rate mortgage who avail of this new initiative.
Note: Transferring Negative Equity is only available to existing permanent tsb customers on home loan mortgage interest rates.
Note: Tracker Portability is only available to existing permanent tsb customers with permanent tsb home loan tracker interest rates who are moving home.
Taking out a mortgage of any kind is always a big decision and it’s important to carefully consider your options before making a decision. We recommend that you seek independent legal, financial and tax advice before proceeding with this mortgage.
If you are a joint borrower with a mortgage on your home at a tracker interest rate and you wish to sell your home and buy a new home separately from the other joint borrower(s), you should be aware that the transfer of a tracker interest rate to your new mortgage (the “Tracker Portability” facility) cannot be divided or shared between you and the other joint borrower(s) so that each borrower can avail of Tracker Portability if purchasing a new home. If you wish to avail of Tracker Portability, a letter (in a form which we have prepared and which must be used) must be obtained from the other joint borrower(s) acknowledging that the Tracker Portability facility will not be available to them.
The purchase of the new property and the sale of the existing property should happen on the same day, with the sale of your existing property happening first. If there is an unforeseen event which makes it impossible to close both the sale and the purchase on the same day, the Shortfall Repayment Agreement you signed as a pre-condition of receiving your Letter of Approval comes into effect. This is an agreement that shows the amount of money still owed on the existing mortgage after the sale of the existing property takes place (i.e. the Negative Equity). Until you purchase the new property, we will apply a capital payment holiday to your account so that your monthly payment is interest only. However, this shortfall amount must be repaid in full no later than six months after completion of the sale date of your existing property. The new mortgage will be used to repay the shortfall amount.
The Letter of Approval, which sets out how much you can borrow for purchasing your new property, is subject to change as it will be based on your financial circumstances at the time of purchase of your new property.
If all or part of (e.g. top-up mortgage) the mortgage on your existing property is on a fixed rate, in order to proceed you’ll need to convert it to a Variable Rate Mortgage. In this case, a Fixed Rate Mortgage Breakage Fee will have to be paid.
Warning: The cost of your monthly repayments may increase.
Warning: You may have to pay charges if you pay off a fixed rate loan early.
It will be necessary to cancel or change your existing insurance policies following the sale of your existing property.
You may have more than one mortgage on a tracker interest rate and these mortgages may have a different interest rate and different years to maturity (term remaining). All the mortgages outstanding that are on a tracker interest rate will be combined and will be transferred using the tracker interest rate and the term remaining of your primary mortgage.
Before the drawdown of your new mortgage, adequate life cover will have to be in place. We recommend that you speak to your financial advisor about amending or taking out new insurance policies.
The availability of Tracker Portability is valid for up to six months from the date of completion of the sale of the Existing Property. Where six months has elapsed from the date of completion of the sale date of the existing property, the Letter of Approval will expire immediately and the shortfall amount including any interest will have to be repaid in full at that time.
Tracker Portability is only available once, it can only be used for the sale and purchase of one property.
Warning: If you do not keep up your repayments you may lose your home.
Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating, which may limit your ability to access credit in the future.
Warning: The cost of your monthly repayments may increase.
Warning: The payment rates on this housing loan may be adjusted by the lender from time to time.
Lending terms, conditions and other restrictions apply. Security and insurance are required. The maximum Loan-to-Value (LTV) for a second-time buyer is 90% and this is subject to other lending criteria and assessment. For customers who are in Negative Equity and want to trade up (i.e. where the total loan amount will increase), a maximum Loan-To-Value (LTV) of 125% applies. For customers who are in Negative Equity and want to trade down (i.e. where the total loan amount will decrease), a maximum Loan-to-Value (LTV) of 175% applies.
Lending levels are subject to a total monthly repayment commitment typically not exceeding 35% of disposable income. However, this percentage will vary depending on the individual circumstances.
Information is correct as of 21/02/2014. permanent tsb p.l.c. is regulated by the Central Bank of Ireland.
Variable rates may be adjusted by permanent tsb from time to time. Rates correct as of 01/05/2013 but are subject to change.
Here is an example:
The monthly repayment on a 20 year Tracker Interest Rate Mortgage of €100,000 (Annual Percentage Rate of 1.68%) is €489.47. In the event that interest rates increase by 1% an additional €47.77 would be payable per month.
The monthly repayment on a 20 year Variable Interest Rate Mortgage of €100,000 (Annual Percentage Rate of 4.5%) is €629.95. In the event that interest rates increase by 1% an additional €55.12 would be payable per month.
Warning: You may have to pay charges if you pay off a fixed rate loan early.
Whenever (i) repayment of a loan in full or in part is made or (ii) with the agreement of permanent tsb, the loan is switched to a variable rate loan or other fixed rate loan, before expiry of the Fixed Rate period (hereinafter called the “Early Termination”), the applicant shall, in addition to all other sums payable as a condition of and at the time of the Early Termination, pay a sum equal to the permanent tsb’s estimate of the loss (if any) arising from the Early Termination.
In the calculation of the said loss, permanent tsb shall endeavour to apply in so far as it is fair and practicable, the formula C=(I-S) x R x (M-T), where C is the charge to compensate for the loss (if greater than 0), I is the swap/market fixed interest rate for the term of the Fixed Rate Period at the date of its commencement, S is the swap/market interest rate for the remaining fixed period, R is the amount of the Fixed Rate loan balance paid or switched at the date of Early Termination, M is the fixed Rate Period and T is the time expired of the Fixed Rate Period at the date of Early Termination.
Interest will be applied to the outstanding balance of the loan. This balance includes any element of unpaid interest and charges which will accrue interest and be capitalised to the account.
permanent tsb home insurance is underwritten by Allianz plc. permanent tsb is appointed as a Single Agency Intermediary of Allianz plc for Home Insurance. Allianz plc is regulated by the Central Bank of Ireland.
Life cover is provided by Irish Assurance plc. permanent tsb is a tied assurance agent for Irish Life Assurance plc (Irish Life). Irish Life Assurance plc is regulated by the Central Bank of Ireland.
