Is there any money to be saved by switching mortgage providers? This is a question I often get asked in this era of rising prices.
For many out there, switching may very well be worth your while. For example, someone paying a 5% rate who has €200,000 remaining on their mortgage over 20 years could save €144 per month if they switched to any of the several providers offering a 3.65% four-year fixed rate, for example.
That’s a saving of more than €6,900 in just four years!
Read more: Budget conscious mum’s genius way to spend less on Christmas shopping and costs
The process
Switching can seem like a daunting task, particularly when it comes to something as important as your mortgage. That, along with the notorious paperwork, is enough to put most of us off making the move. There are also additional costs, such as:
- Solicitor fees: If you switch mortgage providers, you’ll need a solicitor to handle the paperwork, processing and liaising. Their fees should be between €1,200 and €1,500 plus VAT at 23%.
- Valuation fees: A valuation is necessary for switching mortgages as it will help determine the home’s loan to value. Typically, they cost you around €150-€175.
- Brokerage fee: Recently, a brokerage fee may be attached to the mortgage process. This can be for new buyers and switchers alike. A brokerage fee is a fee that the broker charges to process all the paperwork needed to get the approval for the mortgage.
Good news
Some banks will help shoulder this cost, like AIB offer €2,000 cashback when the mortgage is drawn down or Bank of Ireland give up to 3% back on some mortgages’ drawdown amount.
Some banks are also giving more flexible over-payment options to fixed-rate mortgages, fee-free banking, online access, and possible payment breaks.
When should I switch?
The ideal time to switch is after you have come off a fixed rate, moved to a variable rate, or are already on a variable rate. If you are coming off a fixed rate, your bank will send a letter to let you know the date and the variable rate you will move to.
If you are still on a fixed rate, you won’t be able to switch unless you pay breakage fees to switch. Depending on the lender, it can be relatively high, often in the many thousands, so it is worth researching.
Know your APR
When comparing mortgage rates, always compare the APR. APR is the actual rate you will pay on the mortgage repayment and includes the interest rate plus any other internal fees associated with the mortgage loan.
Fixed or variable
- Fixed mortgage rate: With a fixed rate, you lock in your interest rate for a specific term, often several years. This shields you from interest rate fluctuations, making budgeting easier and providing peace of mind each month.
- Variable mortgage rate: A variable mortgage rate, often linked to a benchmark rate like the ECB rate, has benefitted trackers for so long. Recent times have shown that variable rates are uncertain due to potential rate hikes. However, at other times, when interest rates are going down, it can lead to substantial savings in repayments.
Top tips
- Compare offers: Shop around and pay close attention to interest rates, terms, and incentives such as cashback.
- Know your numbers: Use online mortgage comparison tools to help you make an informed decision.
Follow Kel Galvan on Instagram at @mrssmartmoneyhq for more financial tips.
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