If you are considering getting a mortgage loan to buy a new home in Ireland you may want to start thinking about the interest rate you might be paying on your loan. How might your interest change over time? Should you choose a fixed rate mortgage, or are rates going to be low enough in the near future that you believe you will be able to afford a variable rate mortgage loan? Answering questions likes these are important, so we will help you understand what what kinds of factors influence interest rates in Ireland in 2021.
Your Finances
The first thing that might effect your interest rates that you have the most control over is your own personal finances. Some factors regarding your personal finances that will influence your interest rate include:
- Credit Score: The higher your credit score, the lower you can expect your interest rate to be. This is because borrowers with a good credit score have a solid history of making debt payments on a regular basis on time and in full
- Credit History: If you do not have much of a credit history, it becomes harder for lenders to grasp and understanding of your ability to make regular interest payments. This can potentially make you a riskier investment, and as a result could lead to a higher interest rate. As a result, the better your credit history is, the better the rate you will receive.
- Employment and Income: Obviously, employment is an important thing lenders will look at. If you are unemployed, you do not have a steady source of income, and a lack of income means a riskier investment for lenders.
- Debt Ratio: Your ratio of debt to income is also important. If you have a lot of debt relative to your income, you may also see an increase in your interest rate.
The Loan and the Property
The loan itself and details concerning the property will also influence the quality of your interest rate. Some factors concerning the loan and the property you desire that will effect your interest rate include:
- Loan-to-Value (LTV): LTV is a percentage lenders use to compare the amount of the loan that you are asking for to the value of the property. Usually, the lower your LTV percentage is, the lower the interest rate you might expect to pay.
- Length of Term: The duration of your loan will have quite a significant influence on your interest rate. If your term is shorter, it means you will be paying off your debt in less time. This could lead to a better rate, but you will most likely have higher regular monthly payments since you have to pay off the total loan over a shorter period of time.
- Loan Type: Different types of loans such as fixed vs. variable have different levels of risk. As a result, the type of loan you want to receive will directly influence your interest rate.
The Mortgage Market
The supply and demand of the mortgage market is a factor of the mortgage market that you do not have control over like you do with your personal finances. If demand for homes is currently very high you should expect higher interest rates, and inversely low demand means you can most likely receive a better rate.