You can catch-up on the first six episodes of our 'Guide to Getting a Mortgage in Ireland' series on the bonkers.ie YouTube channel. Previous episodes explain topics such as the Central Bank's mortgage lending rules and whether or not you should work with a broker.
Episode 7 explains what is involved in switching mortgages. Enjoy!
MW: Hello and welcome to another episode of our Guide to Getting a Mortgage in Ireland, I’m here with Dave Curry of the Irish Mortgage Corporation and today we’re going to be talking about whether or not you should consider switching mortgages.
In our previous videos, we’ve covered topics such as the mortgage application process, the Central Bank’s lending rules and whether or not you should consider using a broker.
So Dave, everyone wants the best deal available on their mortgage and switching might be a way to do this, under what circumstance should somebody consider switching?
DC: The main reason why anyone would consider switching is to get a lower rate, to save money on their mortgage repayments and on the interest that they pay the banks. A starting point might be looking at the rate they have at the moment, for example, if they are on a tracker rate, which aren’t available for new mortgages right now for new mortgages, and with tracker rates so low, there probably wouldn’t be any reason to shop around right now. However, if they are on a variable rate, there will be every reason to shop around so see if they can save some money on their mortgage.
MW: And how much money can somebody really save by switching?
DC: Well, there can be very substantial savings. For example, if somebody has €200,000 remaining on their mortgage over 20 years, if they can save half a percent on that mortgage rate, that would equate to total savings over the remaining mortgage of up to €13,000.
MW: Just say somebody establishes that they would save money by switching, should they just jump straight in and switch as quickly as they can?
DC: Well, it would be best to shop around for the lowest rate, but also there may be other features that the banks offer, so I would say to get independent advice. But it’s not as straightforward as moving from one bank to another; there is an application process to be gone through and actually not everyone will be able to switch or be eligible to switch their mortgage.
MW: Under what circumstances is somebody ineligible to switch?
DC: For example, their lifestyle or circumstances may have changed. They may have got the first mortgage based on two incomes, and now they may have only one or one and a half incomes in the household, they may have have taken on extra debts that might make them ineligible for the mortgage that they currently hold with a new bank. They’d be a couple of the main reasons.
MW: Ok, are there any other reasons that somebody should look out for before they jump in the deep end and try to switch?
DC: Yes, if somebody has had adverse credit history; if they’ve missed mortgage payments on their current mortgage or on any other credit facility - credit cards, short-term debts – that would make it very difficult to get approved with a new bank. Another circumstance would be if they’re currently in negative equity, then a new bank wouldn’t consider offering a mortgage on the property. So, the mortgage that they have must be no more than 90% than the value of their property.
MW: Do the Central Bank’s mortgage lending rules apply to people who are switching mortgages?
DC: They don’t, actually. Some people can potentially get more than three and half times their income, or of they’re not first-time buyers – which clearly they aren’t at this stage – they could get more than 80% of the value of the property, but it will be subject to the bank’s own limits.
MW: Just say I believe that I can benefit from switching and I believe that I am eligible to switch, what does the process actually look like?
DC: Well from that point the process is really the same as a mortgage application process for buying a new property; gathering the paper work, submitting it through the bank or mortgage broker and going through the approval process that way.
MW: And we covered that in a previous video so viewers can watch and see what all of those steps actually look like. So, are there third party costs involved in switching or is it a simple process that’s free?
DC: There are third party costs. A lot of the banks will cover those with various incentives that they have but your solicitor will need to get involved. There is a less work for a solicitor to do for a remortgage or a switcher than there is for a purchase so that cost should be quite a bit lower, maybe about half the cost of when you purchased the property. The new bank will need a new valuation report, typically around €130, €150. So, the switching costs would usually be somewhere just over €1,000 but many of the banks are offering that amount, or more, as an incentive for switching.
MW: Dave, thanks so much for joining us and filling us in on what switching mortgage looks like and whether or not someone should consider doing it. We’ve got a number of previous videos which are linked below, on topics such as the mortgage application process, the Central Bank’s lending rules and whether or not you should consider using a broker. Click the links below to watch those now. Thanks for watching!
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