A summary of the different types of mortgages that are available in Ireland and an explanation of the differences between these mortgage types.
Annuity Mortgage
Annuity mortgages are the most common mortgage type in Ireland. They are designed to spread repayments evenly over the chosen mortgage term (e.g. 25 to 35 years).
Repayments in the early years of the mortgage are mainly comprised of interest. The capital balance of the mortgage loan owed decreases as the period progresses, until the loan is fully paid off at the end of the mortgage term.
Interest Only Mortgages
Interest only mortgages are mortgages where you only pay monthly interest on the loan, and the main capital balance is paid in one lump sum at the end of the term.
Interest only is not available for standard residential home loans, but is available on a limited basis for certain residential investment property mortgages.
Green Mortgage
This innovation categorises mortgages by reference to their Building Energy Rating (BER).
Major Irish lenders including Bank of Ireland, AIB, and Haven offer Green Mortgage rates with discounted interest rates for energy-efficient homes rated BER A1 to B3. Avant Money, Nua, and ICS offer uniform low market rates across all energy ratings.
Variable Rate Mortgage
This is a mortgage where the interest rate can be changed by the lender from time to time. Typically, changes in rates occur when there are shifts in ECB benchmark rates or underlying lender funding costs.
Variable rates provide complete flexibility to overpay, lump-sum reduce, or switch without early redemption penalties.
Fixed Rate Mortgage
This is a mortgage where the interest rate is fixed for a specified period (e.g. 2, 3, 5, or 10 years). The lender guarantees not to raise or lower the rate during this period.
Fixed rates are popular when market interest rates are expected to rise and where borrowers require complete budget certainty for their monthly mortgage repayments.
Mixed Rate Mortgage
This is a mortgage where you split your overall loan between variable and fixed tranches (e.g. 50% fixed and 50% variable).
This hybrid approach gives you repayment certainty on the fixed portion while maintaining flexibility to make penalty-free overpayments on the variable portion.
