Should you switch your mortgage?

February 26, 2024
Written By: Sean Corbett

Category: Mortgages

Do you have a mortgage? If so, it might be time to consider changing lenders. If you are one of 300,000 mortgage holders on high standard variable rates, you should look at your options. You could save thousands of euros, over the remaining term of the mortgage by switching mortgage provider. If your fixed-rate is coming to an end in the next 6 months, now is the time to consider your options.

Switching is relatively easy with the right help. Sometimes it’s free. Many lenders are willing to contribute up to €5,000. Others give you a cashback of up to 3% of the loan, toward the cost of switching. It varies from lender to lender so make sure you get impartial advice from someone with access to all Lenders such as SYS Mortgages, before switching your mortgage.

if you are on a tracker, variable or fixed rate mortgage, then you should seek advice as the decision you will make could have huge financial implications.

You need to consider:

Is my current lender the best option?
Do I want to save money monthly?
Do I want to cut down the outstanding term of my mortgage?
Is fixed or variable right for me?
Do I want to make over-payments?
Will I move home in the future?
Is cash-back important?
Do I need funds to renovate my home?
Do I need money to pay off my loans?

Mortgage switcher case study

Susan and James have been on a mortgage tracker rate for the past 15 years. They have seen their rate increase constantly in 2023 and they are now on a rate of 5.15%. They have a balance on their Mortgage of €261,000 and 19 years left. They currently pay €1,797 per month. They renovated their property, and it now has a B1 energy rating. They decided they have had a good run with their tracker and now wish to switch to a fixed rate.

We recommended Haven (part of AIB group) and a green fixed rate for 4 years of 3.65% and €2,000 cask back which help pay any costs. Best of all Susan and James were happy to pay the same monthly mortgage payments which enable us to cut their term left to 16 years.

Costs and Paperwork

There are costs involved and documents to be supplied. You will have solicitor’s fees of around €1,500 and your property will also need to be valued at a cost of around €150/€180. The new lender will also treat this as a new mortgage so you will have to supply some paperwork including:

bank statement, payslips, salary Cert, EDS, and proof of ID. Lenders are keen to attract switcher business and some require less paperwork than a normal mortgage.

Is switching your mortgage possible?

When considering switching your mortgage, a good broker will run through your information to make sure a lender will grant you a mortgage and lots will depend on your circumstances now compared with when you first took out your mortgage.

Your income and cost of living may have changed. Every lender bases their decision to lend on their calculators. Each lender has different that work in the background. Lenders are not as rigid as when you purchase a property. However they do still need to make sure you will be able to afford the new mortgage.

Should I stay or should I go?

There are times when it is advisable to stay with your current lender. They may have the best product to suit your ongoing needs. A broker will always explore this with you. Your circumstances may have changed. You may not fit a new lenders requirement such as having bad credit, only one income now, or the arrival of lots of kids.

The great news is that your current lender will have to offer you something from their product range. However the bad news is your lender may have very high current offerings as is the case of some non-bank lenders currently in Ireland. If you fit a new lenders criteria, it makes financial sense and you should switch.

When switching your mortgage remember

You could save thousands by switching your mortgage to a new provider. There are cash incentives from lenders to lure new customers as switching your mortgage should be free and can even leave you with funds by way of cash back from the new lender. Explore is saving money monthly or cutting your mortgage term best for you.
The amount you can borrow will be based on your income, your house valuation, and your affordability. You would need to have a taxable income by way of employment or self-employment. Contract employment is also possible. A good broker will fully access your income to make sure the application will work before you get you hopes up.
You can borrow up to 90% of the value of your home, it is wise to have an idea of the current vale and energy rating of your property, some lenders offer better rate the lower the loan to value or is a green rate applicable.
By rule of thumb, you can normally borrow 3.5 times your gross income. If you are doing a straight switch though central bank rules around income multiples can be exceeded subject to affordability, also some lenders may give enhanced multiples if you are public sector or have a variable income.
The amount you can borrow also depends on what you can comfortably afford to repay monthly, this typically should not exceed 35% of your disposable income, have your own budget in mind also as switching is great but you still need to live.
It’s all about that comfort cushion. Every lender uses a calculator to see what you can afford and these vary from lender to lender, a good broker will know which lenders calculator to use to maximise your mortgage and benefits however it still needs to make financial sense to move your mortgage from one lender to the other.
When looking at savings you can make by switching your mortgage, you can also review what you are paying for your mortgage life cover, at SYS group we have dedicated people to give you a financial health check.
Now may be the time to raise additional money to renovate your home or upgrade your energy rating, there are options available to raise extra money subject to affordability.
There is paperwork needed and little bit of heavy lifting however the rewards from switching can be worth it and with some lenders you may even have a lump sum left over from cash back to spend on a nice holiday or furniture.