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Thread: Euribor rate is dropping fast which translates into lower monthly mortgage repayments

  1. #11
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    Oct 2008
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    I'm afraid this is the way it works. You will be stuck with this rate for a whole year. You have two options:

    1. Talk to your bank and ask for your mortgage to be revised every 3 months (probaby useless, as banks are seldom helpful)
    2. Take your mortgage somewhere else (provided you find a bank willing to offer you better conditions, which might be not that easy at the moment). Not only you will be reducing your 1.25% margin rate, but also the Euribor will be that of the month the binding offer is issued. This has a cost of 0.5% subrogation fee, plus around an extra 0.5% for notary an registry fees, and lawyers fees of 0.5% (in total 1.5%). At the current rates, you would be paying around 3% less on the principal on your first year (1.5% after costs). On a mortgage of, say, €300,000, the savings would be of €4,500. The worst that can happen is that, upon receiving the binding offer, your current bank matches it to prevent you (by law) from leaving.
    Marta (our mortgage expert) may be able to offer further advice.

  2. #12
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    Oct 2008
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    Marbella
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    1,095

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    Quote Originally Posted by Unregistered View Post
    My mortgage went up after a year's fixed rate to 1.25% above the eurobor. When it went up it went up to 6.25%!! UGGHH!! Are you saying that I'm fixed with that rate for a whole year? The eurobor is really low now and it seems wrong that I'm paying SO much interest.
    Adding to ifv's reply not only will you be stuck for the rest of the year until your next interest review with that interest rate.

    Additionally many lenders include clauses in the Mortgage deed by which you cannot pay less than a minimum amount of interest (to which the differential usually averaging 1% for non-residents must be added).

    The same as Mortgage deeds are capped with the maximum amount of interest payable (normally it's around 10% p.a. max) there is also a limit as to how little you can pay interest (a minimum payable interest rate).

    When I started this thread it was done with the intention that borrowers realized that within the next months on their interest rate resetting they were going to pay considerably less a month. But some borrowers have been carried away and are now expecting to pay on their next review less than 2% or 3% p.a. interest and many of them are set for a nasty surprise as this will just not happen.
    Last edited by Lawbird Lawyer; 03-04-2009 at 05:43 PM.

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