How to switch to a better mortgage deal
Switching your mortgage to a better interest rate could save you thousands of euro or help you pay your home loan faster. Here’s how to find the best switcher mortgage.
Why switch your mortgage?
The main reason for switching is to get a better interest rate and save money on your monthly bill. If you’re on a fixed rate mortgage you’ll switch over to the lender’s standard variable rate when the term ends, which is more expensive.
Switching your mortgage every few years means you won’t overpay, and more customers are realising the benefits. Between July and September 2024, mortgage switching jumped by 26% to 1,159; a 7.4% increase compared to the previous year.
The perks of switching will vary depending on your circumstances and goals, but remortgaging can help you:
How much could you save?
You could save thousands of euros if you switch to a cheaper mortgage.
You’ll have to pay legal and valuation fees, but if you choose a cashback deal, this could offset those costs. However, cashback deals may not always offer the cheapest interest rates.
To work out how much you’ll save take these steps:
- Find out from your current lender if there’s an early exit charge
- Compare mortgages and look for the lowest interest rates
- Check your new monthly repayment and how much you could save in total
- Find out the legal and valuation costs, plus any other fees to pay
- Deduct any charges or fees from the saving you’ll make over the term
Example savings
The value of your property is €300,000 and the remaining balance is €150,000 (50% LTV). You have 15 years of your mortgage term remaining and are currently paying an interest rate of 3.75%.
If you were to switch to a better mortgage deal at 2.9% with an APRC (Annual Percentage Rate of Charge) from 3.8%, you could make a potential saving of €746 per year and monthly savings of around €62.
When should you switch?
It’s worth considering remortgaging when you’re reaching the end of your fixed-rate deal or have been on a variable rate for some time.
With a fixed rate mortgage, it’s usually best to wait until the end of your fixed period before switching, otherwise, you’ll have to pay an early redemption charge (ERC).
At the end of the fixed period, you’ll switch over to the lender’s standard variable rate but you can do the following penalty-free:
- Overpay your mortgage
- Switch your mortgage
- Redeem your mortgage
There are lots of things that affect when you should switch, but these are the main three factors to consider:
- The type of mortgage you have e.g. fixed or variable rate
- Whether you’re eligible to switch
- How much you’ll save by switching
What’s your mortgage rate type?
The timing and benefits of switching will depend on whether you’re on a fixed or variable rate mortgage.
Here’s how the type of mortgage rate you’re on affects your switch.
Fixed rate
With a fixed rate mortgage, you may need to wait until the term ends to avoid an early redemption charge (ERC), which could outweigh any savings.
Your lender must let you know if they have any cheaper options 60 days before your fixed term ends.
Variable rate
If you’re on a variable rate, you can usually switch penalty free at any time, but there could still be fees involved in switching e.g. valuation fees.
Your lender should tell you if they have cheaper options available based on your loan to value (LTV).
Are you eligible to switch?
Switching to another lender involves applying for a new mortgage and meeting their lending criteria. Your eligibility depends on things like:
- Your credit history
- Your loan to value (LTV)
- Your affordability, based on your income and outgoings
- How much you want to borrow
- The lender’s minimum loan amount and loan term
If you are unsure whether you’re eligible to switch talk to a broker or potential lender before you apply for your mortgage approval in principle.
Can you still claim mortgage interest relief if you switch?
Yes. The temporary, mortgage interest tax credit (MITC) announced initially in last year’s Budget has been extended to 2024.
To qualify, you must be a homeowner with an outstanding mortgage balance between €80,000 and €500,000 with a qualifying lender as of 31 December 2022. In addition, the interest paid on your mortgage in 2023 or 2024 needs to have increased from 2022.
For example, if your mortgage repayments totalled €13,000 in 2022 and increased to €16,800 in 2024, you can claim 20% tax relief on the €3,800 difference. That would mean a tax credit of €760.
What does it cost to switch?
Fees vary depending on the lender and solicitor you use and if you stay with the same lender costs will be much lower.
Several Irish lenders offer cashback as an incentive to switch, which in most cases, could help cover legal costs and any extra fees.
Here are some of the costs you may have to pay:
- Valuation fees: It usually costs around €150 to get a property valued
- Legal costs: Solicitors can typically charge between €1,500 and €3,000 complete the legal work.
- Early repayment charge (ERC): If you end your fixed-rate term early, an ERC may be applied. Check the amount with your lender.
- Mortgage broker fees: Using a broker is optional, but if you do, they may charge.
Some lenders may charge an arrangement fee or other specific fees for buy to let or high-value transactions. This is also known as a booking fee or product fee.
Find Ireland’s best switcher deals and get a better rate.
Do lenders cover legal fees if you switch?
Several lenders offer cashback for switching which can be used to cover legal fees.
Typically, you’ll get the cash paid into the account you use to pay your mortgage within 2 months.
Here’s what Irish lenders are offering at the moment:
| Mortgage lender | Switcher incentive |
|---|---|
| AIB | €3,000 cashback |
| Bank of Ireland | Up to 3% cashback |
| EBS | Up to 3% cashback |
| Haven | Up to €5,000 cashback* |
| PTSB | 2% cashback |
*on mortgages over €250,000 but excluding the Green 4 year fixed
Moving home and switching
If you’re switching mortgages due to moving home, there will be additional costs including:
- Estate agent fees
- Stamp duty
- Survey fees
What lenders must do to help you switch
Lenders have to follow the Central Bank of Ireland mortgage measures which require them to:
- Let you know about cheaper options 60 days before your fixed rate mortgage ends
- Inform you if you can switch to a cheaper mortgage based on your loan to value (LTV) and how much equity you have
- Explain clearly the pros and cons of mortgage incentives e.g. cashback offers
- Show you how much your mortgage costs compared to other options they offer if requested
- Give you all the information you need to switch, including how long it will take
- Let you know their decision within 10 business days of receiving your completed mortgage application
How to get the best switcher deal
Here’s how to choose a better mortgage and start saving.
Switching to a new mortgage
What happens next?
Once you’ve chosen the right deal, you can apply to the lender for a mortgage approval in principle. Here’s how to prepare for a mortgage application.
If your application is approved, you can progress to a formal offer letter by producing any ID and documents the lender requires e.g. bank statements and payslips.
You’ll need to appoint a solicitor for the legal work, and make sure you have mortgage protection insurance and buildings insurance.
Once everything is in place, your solicitor will arrange for the transfer of funds between lenders, and ensure your new mortgage is ready for you to draw down.
Compare mortgage rates & deals
Find a range of first time buyer and home mover mortgage deals in Ireland using our comparison.
Switching mortgages FAQs
How long does it take to switch my mortgage?
It varies depending on the lender and your individual circumstances, but you should allow around four to eight weeks.
Should I overpay my mortgage before switching?
Overpaying a large sum before you switch could positively affect the deals you can switch to as it will reduce your loan to value (LTV). If you opt to do this, make sure you look at deals with your new LTV.
If you’re switching to a variable rate mortgage, overpaying is very flexible so you can continue to overpay as and when you like.
With a fixed rate deal, you’re usually restricted to overpaying 10% of your balance a year penalty free, so overpaying before you switch is more important.
To find out more about overpaying and whether it’s right for you, read our guide: Should you overpay your mortgage?
Should you switch your tracker mortgage?
Tracker mortgages aren’t available as new products but if you already have one, some lenders offer a follow on tracker mortgage if you’re moving home.
Historically, trackers offered the best rates available but as the European Central Bank (ECB) hikes interest rates, customers are paying more.
If you’re considering switching your tracker mortgage:
- get financial advice and discuss all your options
- compare your current rate with the ECB rate
- compare mortgage rates online to see how much you’ll save
- remember once you leave your tracker, you can’t go back
