Welcome to the August edition of your Privateseller.ie newsletter
Hello and Welcome to this month’s edition of your Privateseller.ie newsletter, August! It will soon be time for the children to go back to school. Can you believe it?
In this month’s newsletter we give some practical advice on how to avoid some of the headaches that can accompany moving house. Changing address can be a most stressful life event. We reveal the secret to perfecting a smooth move!
John Lowe aka The Money Doctor, likes driving in his car, and advises Adrian from Riverstown how he can too, but not at the expense of saving for a home. Feargal White of Coughlan White & O'Toole Solicitors, explains Equity Release Schemes.
In the first of a new series of columns, Fiona Mc Loughlin, MD of Privateseller.ie gives some tips on how to get your property sold starting with the importance of erecting a For Sale board.
There has been a raft of reports published since our last newsletter, and we bring you some facts and figures from the permanent tsb/ESRI index to the Census 2006.
Privateseller.ie welcomes any feedback or ideas for features you may have for future editions of our newsletter. If you have a legal question you would like to see featured email medbh.gillard@privateseller.ie
Until September, enjoy the read.
Smooth Moves
There are lots of ways make your household move smoother. Avoid some of the fabled frustrations that accompany packing up your goods and chattels to change address. Privateseller.ie has practical advice to help get your life, and your possessions, organized for a peaceful and exciting move.
The Money Doctor - Pull up to the bumper baby!
Q: I'm looking to buy my first car so I don't want to spend much money on it (a maximum of €3,000) as I'm sure it'll get a few knocks! However as I'm saving for a deposit for a house, I wondering if it's best dip into my savings for this or take out a loan? If I do get a loan, can you advise me on the difference between a 'car loan' and a 'personal loan', and should I go with my own bank (BOI) or is it worth shopping around for a better interest rate?
Hi Adrian,
Thanks for your query. You have asked all the right questions. Let me start by stating the
obvious: a car is a depreciating asset. Once you buy it, it starts losing money the bigger the car, the greater the loss. Though at the level of entry you are contemplating, it is possible that you could buy a car for €3,000 and recoup most of it 12 months later. However, it is a depreciating asset but a necessary one sometimes.
On the other hand, using your present and possible future savings to buy that depreciating asset precludes you from making any other decision with those savings, like using it for a deposit on a house.
Car loans can be expensive. Let me show you the pecking order of lending products starting with the cheapest
1. Home loans. Depending on the loan to value, you could be paying an interest only loan at 0.75% over the ECB rate, totalling 4.75%. These repayments for every €100,000 will cost €395.83 per month. Some borrowers include car loans with the home loans, paying
off the amount borrowed (i.e. the capital) over a three year period as if they had a separate loan. There are even some mortgage products that allow this (current account mortgages) A €3,000 loan on an interest only basis would cost €11.87 per month. You pay off the capital whenever you want as there are no penalties for paying off lump sums against your home loan.
2. Commercial and residential investment properties. Generally quotations include cost of funds ( the price the lender has to buy the money from the European Central Bank ) plus margin ( the lender profit ) Rates can range from a minimum 5.25% up to 7%
3. Car loans. There are a number of car finance companies. Most of the associated banks have their own subsidiary (e.g. Bank of Ireland will refer your car loan request to Bank of Ireland Finance. The branch receives a notionary credit for your referral, basically gets paid for sending you on to them) and their rates can vary from 7% / 8% up to 11%. A €3,000 car loan over 3 years at 9.5% will cost you €96.09 per month.
4. Personal loans. There used to be a time when taking out a personal loan was cheaper than going to a car finance company. Most personal loans the majority are taken out to pay off overdrafts over an agreed period can attract rates between 7% and 14% depending on your bank relationship and how minimal the risk is to the bank. Credit Unions come under this category too they can offer very competitive rates. Check your local CU as they vary from branch to branch. For example, a €3,000 loan over 3 years at 11.4% will cost you €98.79 per month. If you incorporated this loan into your home loan at 4.75%, the saving just from the reduced interest rate would be over €9 each month!
5. Credit cards. While the lowest interest rate on the market is 9.5% on credit card balances (0% on transferred balances for the first 6 months) you can pay over 17% on certain cards and then surcharges apply e.g. take out cash and the interest clock ticks straight away, if you miss your minimum payment by a day, or don't pay it at all surcharges apply. Store cards are even more penalizing.
6. Moneylenders. There are nearly 50 Central Bank authorised moneylenders. These lenders charge a minimum 23% interest rate and target the poorer sectors in our
community... the very people who cannot really afford them. STAY CLEAR IF YOU CAN.
Therefore Adrian, to answer your question, I would keep saving both for your home deposit AND that Rainy Day Fund ( between 3 and 6 months annual income ) Take out that car loan BUT shop around. By only going to your bank, you are limiting your choice and will never know if there is a better deal elsewhere. Your bank will not tell you where the best deal is, especially if it is not their own!
Happy motoring!
Legal Question: Equity release schemes
Q: 'My elderly Father needs to access a substantial sum of money. He has no savings or investments. His only asset is his house which he owns. He is considering an equity release scheme. Can you tell me what this is?' Carmel, Tipperary
A: In answer to your query, equity release schemes are becoming more popular particularly with elderly property owners as a way to accessing money tied up in their property. The Schemes are geared to those who would like access to large sums of money but due to old age or poor health are considered bad risks by lending institutions across the board. These schemes indicate that the person mortgaging or selling an interest in their property does not have to make any repayments in their lifetime.
On the face of it Equity release schemes may sound like an attractive alternative however in reality this is not necessarily the case. These schemes can be very expensive. As the company will not make any profit during the life time of the property owner, the rates can be very high. It is important to examine the rates and figures involved.
There are two different options. Firstly, a person may opt for a lifetime mortgage over the property or alternatively, they may choose to sell a portion of the interest in the property. The second option allows the property owner to maintain a right of residence in the property during their life time. The end result for both options is the same: the person loses the autonomy to deal with their property how they wish. Upon the death of the borrower, the debt is called in and in some cases, once the debt has been cleared, the remaining amount of money to be distributed amongst the surviving family members has diminished substantially. In this regard it is important that an independent valuation of the property is carried out at the time of negotiating the Equity Release.
The provisions found in these types of schemes are more onerous than conditions found in other mortgages offered by Lending Institutions. In some situations the companies offering the Equity Release product reserve the right to sell the property in certain scenarios, for example where the property owner has left the property unoccupied for periods at a time.
The reality is that some elderly people find themselves with no other options available and opt for the equity release schemes. Carmel, I would advise that your father should explore all avenues before deciding on one of these schemes and above all obtain independent legal advice to ensure that he understands and is satisfied with the implications of the scheme.
Fiona's Tip: How to get your property sold - The for sale board
We get asked on a daily basis for advice on how to get your property sold. The questions we get asked and the answers we get from sellers who are having difficulty are almost invariably the same. It even formed the basis for one of our Ireland AM items on TV3 and more recently on Mooney on Radio 1. We had such a phenomenal response to the advice that I gave that we decided to include it in our members newsletter. This week we are highlighting the importance of a For-Sale board to getting your property sold.
