Switching your mortgage in Ireland can be a prudent financial move for various reasons. By securing a lower interest rate or more favourable terms, you may significantly reduce your monthly repayments, saving money over the life of the loan. Moreover, accessing features like flexible repayment options, overpayment facilities, or improved customer service can enhance your overall mortgage experience.
If market conditions have changed since your initial mortgage, which within the last 18 Months, we have seen interest rates increase, for example… taking advantage of rates offered by other lenders as a New Business Customer can contribute to long-term financial stability, making mortgage switching a strategic decision for potential cost savings as much as €12,3844 on a 4 Year Term Saving (Example below)
Many Lenders now offer Cashback incentives to homeowners in Ireland, providing additional financial incentives to make the switch. Cashback offers typically involve the new lender providing a lump sum payment to the borrower upon the completion of the mortgage switch; these can range from €2000-5000, which will more than cover any costs associated with switching.
So what do you need to do to ensure you have the most cost-effective mortgage on the market, and what’s needed to prepare to switch to another lender?
Review your current mortgage terms, interest rate, and outstanding balance.
Consider your reasons for switching, such as obtaining a lower interest rate, better terms, or additional features.
Contact your current mortgage lender to discuss your intention to switch.
Inquire about any penalties or fees associated with breaking your current mortgage contract. This is often called a “breakage fee” if you are still on a Fixed Interest Rate. Also enquire what rates are currently on offer if you were to fix for a longer term.
The new lender will conduct a full affordability assessment to ensure you can meet the repayments. Be prepared to provide details of your income, and any existing debts. Whilst the paperwork required for a switcher application is less, a full Loan to Income, Debt Service Ratio and Net Disposable income along with ensuring Demonstrated Repayment Ability is Cleary evidenced on assessment.
Prepare a comprehensive documentation checklist, including proof of income, bank statements, and identification documents. Timely submission of required documents can expedite the application process.
The new lender may require a valuation of your property to assess its current market value. The cost of this is c€150-200
If you have mortgage protection insurance with your current lender, check whether you can transfer it to the new mortgage or if you need to arrange new coverage.
Inform relevant parties, such as your insurance provider and any other entities associated with your mortgage, about the switch.
If you decide you are going to switch, often the slowest part of the paperwork is obtaining the Title Deeds from your current Lender – you can instruct your solicitor to request same on a ATR (Accountable Trust Receipt)
Once approved, the legal process begins.
You will need a solicitor to handle the legal aspects of the switch. The cost associated with this can range from €1000-2000
The solicitor will review and prepare the necessary legal documents, including the mortgage deed.
Once all checks are complete, the new lender will issue a formal mortgage offer.
Carefully review the terms and conditions before accepting the offer.
Obtain a redemption statement from your current lender, detailing the amount needed to pay off your existing mortgage.
The new lender will transfer the mortgage funds to your solicitor, who will then use them to pay off your existing mortgage and cover any associated fees.
Your solicitor will handle the process of closing your old mortgage with the funds provided by the new lender.
Once all payments are made, the switch is complete, and you are now a customer of the new lender.
Lenders often assess your loan-to-value ratio, which compares the mortgage amount to the property’s value. A lower LTV ratio may result in better interest rates and terms.
Interest rates have Increased since you took out your original mortgage, and if you are now coming off a low fixed interest rate you will be faced with being offered a rate that may be 2-3% Higher than what you are currently paying there is a significant cash saving to be made here by switching.. see the following example as to how much can be saved by switching !!
House Value €400,000
Mortgage Remaining €320,000
Term Remaining 25 Year
Current Rate 2.05%
Energy BER B3
Being offered 5.1% – €1,885 Per Month (3 Year Fixed Rate)
Available Rate 3.65% – €1,627 Per Month (4 Year Fixed Rate)
Monthly Saving €258 per month
Annual Saving €3,096 per month
4 Year Term Saving €12,384
If your financial situation has changed, such as an increase in income or reduction in debt, you may be in a better position to negotiate more favourable loan terms. This could include a shorter loan term or a lower interest rate.
If you have built up equity in your home, refinancing may allow you to access that equity for other financial needs, such as home improvements, or education expenses.
You might want to switch your mortgage to change the duration of your loan. For example, you may want to switch from a 30-year mortgage to a 15-year mortgage to pay off your loan faster.
Major life events, such as marriage, divorce, or retirement, can impact your financial situation and goals. Switching your mortgage to align with these changes can be a strategic move.
When considering switching your mortgage, engaging the services of a mortgage broker can be a valuable decision. A mortgage broker acts as an intermediary between you and potential lenders, helping you navigate the mortgage market to find a suitable lender. A mortgage broker will assist you in the mortgage switching process from start to finish.
Use online mortgage calculators and comparison tools to estimate potential savings, compare interest rates, and understand how different loan terms can impact your finances. This can help you make an informed decision.
Ensure that your credit report is accurate and up-to-date before applying for a new mortgage. Errors in your credit report can affect your ability to secure a switcher Mortgage
You will need to prove to the New Lender that you have the available savings to cover the following cost
– Legal Fee €1000-2000
– Valuation €150 -200
Depending on the property the new lender may require a structural engineers report. This will be discussed prior to approval.
Remember, switching is a financial decision that should align with your specific goals and circumstances. It’s essential to carefully review your current mortgage terms, shop around for competitive rates, and weigh the potential benefits against the costs involved in switching. Consulting with a Mortgage Broker will provide valuable insights tailored to your situation and allow you to make an informed choice.
Article by Margaret Barrett
Managing Director at Mortgage Navigators,