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. 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.
The benefits of switching your mortgage will vary depending on your circumstances and goals, but remortgaging can help you:
When should you switch?
It’s worth thinking about remortgaging when you’re reaching the end of your fixed rate deal or if you’ve been on a variable rate for some time.
There are lots of things that affect when you should switch, but these are the main three factors.
- What type of mortgage you have e.g. fixed or variable rate
- Whether you’re eligible to switch
- How much you’ll save
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.
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.
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.
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
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.
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: These usually amount to between €1,000 and €1,500.
- Early repayment charge: An ERC may be applied if you end your fixed-rate term early.
- 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.
What if I’m 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
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||Get €2,000 cashback|
|Bank of Ireland||Up to 3% cashback|
|EBS||Up to 3% cashback|
|Haven||Get up to €5,000 cashback*|
|Permanent TSB||2% cashback|
*on mortgages over €250,000 but excluding the Green 4 year fixed
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
Find Ireland’s lowest mortgage rates and switch today.