If you’ve been struggling with the repayments on your home mortgage, you may want to think twice about it.
According to research conducted by Capital One Finance, the vast majority of people are unlikely to pay it off with their home equity.
It said the average homeowner who has a home equity line of credit (LoC) will need to pay a loan of at least €20,000 in interest to pay down the loan, and that some borrowers may need to make more than €60,000.
“It’s hard to know whether or not the homeowner will ever be able to pay their loan off and it may even be harder to get an income,” said Caroline Henn, senior economist at Capital One.
“However, it may not be as bad as some people believe.”
Capital One Finance said the majority of borrowers who had loans in the first year of repayment would pay off the loan in full within two years of their loan expiring.
“As such, this analysis focuses on borrowers who have a long-term home loan,” it said.
It added that the average interest paid on the loan was 8.7% which was below the national average of 11.2%.’
Not in my backyard’Many of the borrowers who need to repay home equity loans may be in the suburbs.
“It’s not in my hometown, it’s not something I’ve ever done,” said Frances Dickson, who had a mortgage on her family home for seven years until she got a loan.
“I think I’m not in the best place to repay.”
Dickson had a loan to pay for her first house, but said it was a very good deal.
“The interest was pretty good,” she said.
“We’d been living there for four years and I’d bought it a year or so ago.
It’s a lovely place to live.”
The study said that the biggest problem was the length of the repayment period, which was 18 years for the average loan and 20 years for those with a variable-rate loan.
However, there was no difference between the length or the rate of repayment.
“If you want to get the loan off the ground, there’s no need to put your life savings in a mortgage,” said Dickson.
“If you can afford to repay your loan, it should be straightforward.”
The average home loan is around €200,000, but it is worth noting that some loans can be paid off more quickly than others.
“Some borrowers may find it easier to pay the mortgage upfront and some may find the cost of refinancing easier,” said Mr Henn.
The average monthly repayments were €5,700 in 2014-15.
Capital One’s research showed that some people with a loan that was paid off within a year were in the same situation.
“A majority of loans paid off in five years or less are variable-rated and can be repaid within a few years,” said Ms Henn