If you are paying a mortgage, how much you pay back every month depends on:
- Your outstanding balance: This is the amount of money you have left to pay
- Your mortgage term: This is the length of time until you have fully paid off your mortgage
- The interest rate: This is set by your lender or is based on the European Central Bank (ECB) rate if you are on a tracker mortgage.
You can switch your mortgage to another lender or to another mortgage product provided by the same lender. This could save you money because:
- The new mortgage may be at a lower interest rate
- The new lender has a special offer, like a ‘cashback’ offer
If you are currently on a variable rate, you can switch your mortgage at any time. If you are on a fixed-rate rate, you may have to pay a fee for ending the fixed-rate early. If you switch to a different lender, you will have to pay legal fees similar to when you first bought your house.
1 May 2023
Mortgages
Should I switch my tracker mortgage?
Do I need a credit card before I apply for a mortgage?
What does a bank look at when you apply for a mortgage?
Should I go to a bank or a broker for my mortgage application?
What's the best type of mortgage protection insurance?
If you’re applying for a mortgage, you can find the information you need in our money hub. You can also compare your options using our mortgages Money Tool if you are wondering whether you’d be better off with a different mortgage.
This week, Eoin was asked if banks consider a consumer’s credit score when applying for a mortgage. While Irish banks don’t use credit scores, you should be aware of your credit history and how banks will look at it.
Compare mortgages
Why switch?
You can use the CCPC Money Tools to compare your mortgage repayments with different products and providers. Switching to another mortgage or switching rates with your current mortgage provider could save you money if you move to a lower interest rate or avail of a special offer.
Lower interest rates
A lower interest rate will save you money. If you are on a tracker mortgage, you should seek financial advice as while you may be able to get a cheaper rate in the short term, you may lose your right to go back on your tracker rate.
Example
Ann has 20 years left on her mortgage. She has €200,000 outstanding and is paying an interest rate of 4.5%. Her monthly repayments are around €1260.
What would happen if she switched to a mortgage rate of 3.5%?
| Current rate – 4.5% | New rate – 3.5% | |
| Term | 20 years | 20 years |
| Monthly repayment | €1260 | €1160 |
| Total cost of credit | €101,000 | €77,000 |
Special offers
Many lenders offer special offers such as cashback if you switch your mortgage to them. Cashback and other special offers are tempting, but you should always check that you will make long term savings from switching your mortgage.
How can I get a better rate?
While you may have shopped around and chose the best rate when you took out your mortgage, you might not necessarily still have the best rate available to you. This may be because other lenders are now offering lower rates, or it may be that you now have a lower LTV ratio, a better BER rating or the rates available have changed and you are on a fixed rate mortgage.
Loan-to-value (LTV) ratio
The LTV ratio of your mortgage is the amount you owe on your mortgage in relation to how much your home is worth. Lenders generally offer lower rates to borrowers with lower LTV ratios. You will need to get a professional home valuation to apply for a reduced interest rate based on a reduced LTV ratio. There are two reasons why you may have a lower LTV ratio now than when you first took out your mortgage.
- Your house value has increased
Your home’s value may have increased since you took out your mortgage and your LTV ration may be lower as a result. - Your outstanding mortgage has decreased
As you pay off your mortgage, your LTV value also decreases. If it has been a few years since you started paying your mortgage, you may be able to get a cheaper rate with your new lower LTV ratio.
Example – reviewing your LTV
Jenny bought a house for €250,000 four years ago. She borrowed €210,000, which was 80% of the value of the house. This means Jenny had an LTV ratio of 80%. Her current variable rate is 4.6% and her mortgage term is 35 years. She pays €1006 per month.
Jenny knows that house prices have increased in the past four years. She pays to get her house valued, and it has risen in value to €350,000. Her outstanding mortgage has also decreased to €199,200, which is under 60% of the value of the house. This means her LTV ratio is now less than 60%. Jenny’s lender offers lower interest rates for homes with less than 60% LTV.
Jenny is now on a lower variable rate of 3.9%. Her monthly repayments have reduced by €90 per month. Over the term of her mortgage Jenny will save €33,330.
This example is for illustrative purposes only (July2023).
Building energy rating (BER)
The BER rating of your home is based on how energy efficient your home is. A rated homes are the most efficient, and G rated homes are the least efficient. Read about BER ratings on the Sustainable Energy Authority of Ireland’s website.
If you have improved the BER rating of your home by carrying out home improvement, you could qualify for a ‘green mortgage’ rate. This may be at a lower rate than your current mortgage.
Fixed rate mortgage
A fixed rate mortgage is when you are on a set interest rate for a set period. If the bank’s interest rates change during this set period, your mortgage will not be affected because your interest rate is fixed.
If you are on a fixed rate mortgage you could be paying more on your mortgage than you would if you were on a variable rate mortgage. You could save money by switching, but you may have to pay a fee for leaving the fixed-rate early.
If you are coming towards the end of your fixed term, you need to decide if you should switch to a variable or you may prefer to fix again. You may also consider switching to a fixed or variable rate with another lender.
Can I switch?
You may have difficulty switching in some situations:
Small balance
If the amount you have left to pay on your mortgage is small you might not be able to switch. This is because some lenders have a minimum amount that they are willing to lend.
Mortgage term
The term of a mortgage is how long the mortgage is for. Many lenders have minimum or maximum terms. If you are near the end of the term of your mortgage or you want a longer term than the lender is willing to give, you will have difficulty switching your mortgage.
Negative equity
Your home is in negative equity when the value of your home is less than the amount left to pay back on your mortgage. Negative equity makes it harder to switch your mortgage.
Repayment history
The lender you apply to will carry out a credit check to measure the risk involved in giving you a mortgage. If you have missed repayments on your mortgage or you have had any other credit issues, this could make it more difficult to switch.
Fixed-rate
A fixed-rate mortgage is when you are on a set interest rate for a set period. If the bank’s interest rates change during this set period, your mortgage will not be affected because your interest rate is fixed.
If you are on a fixed-rate, you might have to pay a penalty to break the fixed-rate arrangement. This is often called a redemption charge or a breaking fee.
Mortgage protection insurance
You could have difficulty in getting mortgage protection insurance if you have had a serious illness, or because you are now older than when you took out the mortgage. You should check what type of policy you currently have and see what options are available at the new lender before deciding to switch.
Last updated on 13 February 2024
Tags: Money, Mortgages
