Margaret Irwin and Margaret O’Connell, Associate Solicitors, look at the pros and cons of re-mortgaging your home.
Our monthly mortgage payment is, for most of us, our single biggest expense every month. With the Central Bank estimating that one in five of us could save money by switching mortgages, it is time for all of us to examine whether or not we could save money by switching.
Take a couple who took out a €200,000 mortgage on one of the higher variable rates and still has 25 years left to repay- over the course of the mortgage, if they switch now to one of the most competitive rates, they could save up to €40,000.
There are quite a few websites where you can compare your monthly mortgage amount with other interest rates on offer and see how much you could save by switching.
Click here for a comparison tool on the Competition and Consumer Protection Commission so that you can check the monthly payments on your mortgage.
What about cash back mortgages?
At the moment, Bank of Ireland are offering a 3% cash back offer with 2% being offered at the outset and a further 1% if you stay with them for a further 5 years. That would mean on a mortgage of €300,000, an initial €6000 cash back with a further €3,000 five years later.
However many of these cash back offers do not offer the best mortgage rate, so it is best to do your sums first- while in the short term the cash back offer is very alluring, you could end up paying much more over the term of your mortgage with a higher rate.
The Central Bank ( Variable Rates) Mortgages Bill is currently pending before the Oireachtas which is essentially to give the Central Bank power to cap variable rate mortgage interest.and Michael McGrath, Finance Spokesperson for Fianna Fail has proposed an amendment to that bill seeking to ban cash back offers from banks for re-mortgaging.
Do I need to switch to get a better rate?
If your loan to value ratio has changed since you first took out a mortgage, you could be eligible for a lower rate with your own bank as the best rates are given for homeowners with more equity in their homes.
However do check the mortgage comparison calculators just in case you can make bigger savings by switching.
I could make substantial savings, how do I switch?
You can either approach the bank of your choice directly or via a broker. If you use a broker there may be intermediary fees due to them, but they can make the process easier. In general you will have to provide your documents of identity, bank statements for the last 12 months and your proof of income such as your P60s.
Some banks will offer payments towards your legal fees and some won’t, however the amount you can save may be well in excess of the legal fees even if the bank of your choice does not offer to pay, so do your sums well to make the best savings.
You will also have to get a current valuation of your home and you may have to pay the valuer’s fee. Once you have loan approval in principle, it is time to contact your solicitor who will get all the paperwork ready to repay your old mortgage and switch the lenders on your title.
We would be happy to talk to you if you are considering switching your mortgage.
About the authors: Margaret Irwin is an Associate Solicitor with extensive experience in Residential and Commercial Conveyancing and is also the Quality Manager at Dermot G. O’Donovan, solicitors.
Margaret O’Connell is an Associate Solicitor and a qualified Trust and Estate Practitioner ( TEP) and is a member of STEP international.