Thinking about switching ? Switching your mortgage can save you a lot of money each month and it is becoming easier to do with the latest in technology hacks available to us. Being one of the largest expenses of a persons life, switching your mortgage every few years can reduce your interest rate significantly which reduces your monthly repayments. With a rise in ECB (European Central Bank) interest rates expected, now could be a good time to switch your mortgage for a lower rate. Each mortgage interest rate is the driving force of how much money you can save!
Irish lenders after the financial crash around 2008 enforced higher customer interest rates. After the introduction of international banks to the Irish market, switching your mortgage gave people a lower rate of interest to compete with the market and allow more people to switch their mortgage.
Since 2003 over 150,000 people have switched their mortgage, according to the Banking & Payments Federation Ireland. Fully recognizing the opportunity as a way to becoming more financially secure by way of reducing your monthly mortgage repayment.
Best time to Switch your Mortgage
You can switch your mortgage at any time, no time is necessarily the best or ideal time to switch. The best time to switch your mortgage is as soon as you decide to be clever with your hard earned money.
Switching your mortgage can be done completely online and can be free. Most online switching services give you a full range of options from all lenders and are performed by a mortgage broker such as ourselves. We will handle all the paperwork, get the lowest rates for you and the most favorable terms for your mortgage which will in turn save you a lot of time and money in mortgage repayments.
It is important to plan ahead as much as you can when switching your mortgage.
Is Switching your Mortgage an option for you?
In order to see if switching your mortgage can be possible for you, consider your current mortgage details:
- How much is left on your current mortgage, what is the balance to be paid to your lender. Minimum switching acceptance amount by competitive lenders is usually €30,000 – €40,000.
- Some lenders wont accept your switch proposal if there are only a few years remaining on the current mortgage usually 5 years is the minimum term remaining.
- If in a negative equity situation this can make switching difficult. This is dependent on the lender. Their assessment will go on a case by case basis to ensure an accurate home equity value.
- Having a fixed rate mortgage with a specific lender could mean that you are charged a penalty fee for switching your mortgage. This fee usually is not large and could amount to far less than your own savings.
Knowing these key factors will provide you with the complete criteria necessary in switching your mortgage.
Steps in Switching your Mortgage
Below you can follow the steps and questions to assure you that switching your mortgage can benefit you financially.
- Keep a record of your financial situation as of the present
- How much you still owe?
- How long is the term?
- What’s my current interest rate ?
- Look into all lenders and their benefits.
- Paying off any legal fees
- After approval from your lender a direct debit form will be needed to be filled out
- Proof of identity. Example : Copy of your passport.
- Proof of address Example : Household bills over the last 3 months.
- Proof of your income and evidence that you mange this income
- Provide information on the amount you save per month/ yearly.
- Employment status : Information on your current employment providing the lender on the contract type of the employment (Permanent, Full-Time, Part-Time).
How Much Could I Save?
Below you can follow example to see just how much you can save by switching your mortgage.
Lets say your cost of mortgage balance is €300,000 at a 3.5% interest rate.
Your monthly repayments cost roughly €1,502 per month for a 25 year period.
Your total cost i.e total amount including interest comes to €450,715.
Now you plan to switch to an interest rate of 2%.
Your monthly repayments after the switch will reduce the amounts to €1,272.
Reducing your total to €381,536
Here you can see that at the lower rate of interest , you can save €230 per month and then over €69,000 over the period of 25 years.
Note that if you choose to keep the repayments the same, at the lower rate this will reduce your term by 4 years and 8 months which will give you additional savings €16,349. With total savings in interest valuating at €85,528.
Note: Depending on your lender also, switching your mortgage you could also receive a cashback lump from the new lender contributing to your legal fees. Saving you even more!
Switching your mortgage today will help you save a lot more for the future !