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How much does a mortgage of €1.5m over a 25 year term cost?

8 Albany Road in Ranelagh has a BER rating of D1.  Bank of Ireland will allow a reduction in interest rate of 0.20% for a D BER rating.  

This is your big move and you have no plans to sell the house until you decide to either downsize or head somewhere sunnier in your later years & when the kids have grown up and found their own homes (somehow!).  This means that you’re happy enough to commit to a fixed rate of interest.  You also like the notion of stability and security with this new, higher mortgage repayment that you’re going to take on.  That said, you don’t want to over commit to a fixed rate term, as the ECB have been reducing rates steadily and it looks like they might continue to do so into next year – ceteris paribus, which is a fancy Latin / Economics term used to say assuming all other things remain equal.  You’ve decided that you are prepared to commit to a 4 year fixed rate, which currently (as of 02.10.2024) would be 3.75% with BOI Mortgages.

€1.5m over a 25 year term at a rate of 3.75% will cost you €8,126.07 per month.

You’ve done your sums and you both feel that you can handle this repayment every month.  In fact, you’ve proven it, as your old mortgage repayment was €4,750 per month and you’ve been saving regular monthly amounts of €4,000, so you can prove your combined €8,750 Demonstrated Repayment Ability to your bank.  You have no other loans – the Tesla and the Volvo XC90 are both provided by your employers or leased by your company.  You paid for the classic Merc with cash.

So what are the other regular costs?

Basically, you will ‘need’ your life assurance or your mortgage protection policy.  Mortgage protection is just life assurance.  It is the lowest form of life assurance as its’ sole purpose is to clear the outstanding balance on the mortgage should either of you die during the mortgage term. 

As the loan balance is decreasing, so too will your mortgage protection policy in the benefit that it will pay out if either of you die.  E.g. 10 years into the mortgage, one of you dies, the outstanding mortgage balance is €1,033,000, so the policy pays out €1,033,000 and the mortgage is cleared.

I say ‘need’ because this is all your lender will need you to have,.  What you ‘should’ do is make sure you are fully covered for all possibilities or eventualities.  You need to make sure you would still be able to make the mortgage repayments if one of you were to become ill and couldn’t work.  Not all companies offer sick pay for any major amount of time, so you should consider income protection cover. 

Your mortgage protection policy that will provide cover for both of you on a joint life basis, for a mortgage of €1.5m over a 25 year term will cost you €264.74 per month, so we’re at a total of €8,390.81 in must have payments every month.  You will also have to pay for buildings insurance, but that’s best paid once a year.

You know yourselves that you can meet with the €8,126.07 in monthly mortgage repayments.  You can even prove it to your lender – in fact you can prove it for at least 6 months in advance, as this is what all lenders need to see.