Could Switching Mortgage Save You Money?
When you buy car insurance, you probably shop around for the best deal. This is an exercise you might repeat every year or so to make sure you’re not paying more than you need to. And this is exactly what you should do with your mortgage.
Mortgage lenders are all in competition with each other. This is something that you can use to your advantage. Just because you got a good deal five years ago, doesn’t necessarily mean that it’s still a good deal today.
Save €1,000 or more within a year
In fact, research by the Central Bank of Ireland found that three in five people in Ireland could save €1,000 or more within a year of switching mortgages. It also found that 60% of switched mortgages are €10,000+ cheaper over the remaining term of the loan.
These are huge savings. Yet many people are only just realising the benefits of switching mortgage. In the first six months of 2019, just 3% of mortgages were switched. In 2021, 7,000 people switched lender – a record high and a 22% increase compared to 2020.
Will it cost me?
Research by the Central Bank of Ireland also found that people don’t switch mortgages because they’re worried it’s a long, complicated and costly process.
Certainly, there is some admin involved. First, you’ll need to compare mortgages to see what’s out there in terms of interest rates, terms and incentives. When you find a deal you like the look of, you’ll need to make an application to the new lender, just as you did when you first got a mortgage. You’ll have to provide various documents and pieces of information, including:
- Proof of identity, such as a passport
- Proof of income, which is normally your past three payslips
- Proof of address, such as a utility bill
- Information on your employment status
- Proof of how you manage your money, usually evidenced via your bank statements
- An up-to-date house valuation
The lender must approve or reject your application within 10 business days of receiving it. If the application gets rejected, then it doesn’t matter – your current lender can’t treat you any differently. If it gets approved, then you’ll need to get a solicitor to manage the legal transfer.
You’ll have to pay some fees, including:
- A small land registry fee
- A small ATR deed fee to your current lender
- A valuation fee
- Search fees
- A legal fee
However, there is no stamp duty or big land registry fee. Switching mortgage certainly isn’t as expensive as when you first took out a mortgage on the property. Furthermore, lots of lenders actually offer a cash incentive when you switch. Some mortgages providers have been known to offer anything from €2,000 up to 2% or 3% cash back on switcher mortgages. This will go a long way to covering some (if not all) of the costs.
Are you on a fixed rate?
The other thing to note is that you may have to pay a breakage fee if you’re currently on a fixed rate mortgage. If so, you might prefer to wait until the end of the term. Or, the cost of the breakage fee might be worth paying to secure greater savings.
Can everyone switch mortgage?
In theory, anyone can switch mortgage. However, as mentioned above, you have to make an application to the new lender. This lender may or may not approve your application. Factors that decrease your chance of a successful application include:
- A poor credit rating
- Being in negative equity
- Having less than five years remaining on your mortgage term
- Having less than €40,000 left to pay on your mortgage
Therefore, you might not be able to switch if there has been a significant change in your financial circumstances since you last got a mortgage. This includes a change in employment status, reduced income or lots of unpaid debts. Also, if you don’t have a big outstanding balance/very long left on your mortgage term, the lender might not feel it’s worth accepting you.
When to switch your mortgage
You can switch your mortgage at any time of the year. If you are on a fixed rate, you might prefer to wait until the term has expired. That way, you won’t be penalised. Even so, it takes about six to eight weeks to switch, so you should start shopping around before the term ends. This ensures you don’t roll onto a variable rate at the end of the term, but instead are ready with a new, competitive deal.
Central Bank exceptions are needed for people trying to borrow more than 3.5 times their salary. More exemptions are offered at the start of the year.
Ultimately, it’s always a great time to make a saving – regardless of the month!
Choosing a solicitor
If you do decide to switch your mortgage, you will need to find a solicitor to manage the conveyancing side of things. You might like to use the same solicitor as the one who handled your property purchase, as they have already reviewed the title for the property and will be familiar with it. However, you can instruct an alternative solicitor if you like – the choice is entirely yours to make.
At Mullins & Treacy LLP Solicitors, we help people across Ireland with their mortgage switch. If you’re in the process of switching your mortgage, we can help you. We are client focused and results driven.
Call us on 051 391 488 or email firstname.lastname@example.org for a no obligation enquiry. We are client focused and results driven.
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