At bonkers.ie we know that switching saves. And switching your mortgage can really save. So what are the steps involved in switching?
Your mortgage is likely to be your biggest household expense for years so this is one bill that you don't want to overpay on! And just like any other bill, you should look into switching your mortgage to ensure you’re not overpaying.
So what are the steps involved in switching, how much could you save, and it is an option for everyone?
What are the steps involved in switching your mortgage?
Know your current situation. Find out how much is owed on your existing mortgage and the term remaining as your new lender will need to know this. And most importantly you need to find out the interest rate you’re currently paying. You can find all this information on a recent mortgage statement or by contacting your lender.
Compare. Compare mortgage providers on bonkers.ie to find out who's offering the best rates and whether it makes financial sense to switch. Our mortgage calculator and comparison service lets you easily compare interest rates, offers and cashback incentives from all of Ireland’s mortgage lenders and will quickly show you what your new monthly repayments would be.
The documents. Get in touch with your new bank to request a mortgage switching pack and then submit your application. Alternatively you can also switch mortgage through a broker. Remember that you'll need to provide documentation such as:
In other words, it's a bit like submitting a new mortgage application. However the good news is that under new Central Bank requirements the bank you’re looking to switch to must give you all the information you need to switch and give you a decision within 10 business days of receiving your completed mortgage application.
- Proof of identity: such as a copy of your passport.
- Proof of address: such as a recent household bill in your name. To be accepted most bills will need to be dated within the past three months.
- Proof of your income: including your latest P60 and at least three recent pay slips.
- Evidence of how you manage your money: you’ll be asked to provide a copy of your current account statement for the previous six months. If you have any loans or credit cards, you’ll need to provide statements for these also.
Evidence of any savings you might have.
- Employment status: your new lender will want information and proof as to what type of employment contract you are on. For example, permanent, contract, full-time, part-time etc.
- House valuation. You'll need to get an up-to-date valuation of your home. This is so that your new lender knows how big your mortgage is in relation to the price of your house or apartment and therefore how much equity you have. The more equity the better. The fee will be around €150 and the lender you're looking to switch to will give you the name of an approved valuer.
The legal bit. Some banks may request that you get a solicitor on board to take care of conveyancing and any legal documents. Make sure you ask about any cashback incentives as many lenders offer money to help cover the legal costs of switching.
Mortgage protection. If you decide to switch mortgage provider you don’t need to take out a new mortgage protection policy as long as the amount you borrow and the term of your mortgage remain the same. In this case you just have to contact your current insurance provider and get them to reassign your existing policy to your new lender. However this might be an opportune time to look at getting cheaper mortgage protection too.
Direct debit. When your mortgage is approved, your lender will ask you to fill in a new direct debit form so your repayments can be collected from your bank account. Remember to cancel the direct debit with your previous lender to ensure no further payments are taken.
Done. Welcome to a cheaper mortgage!
How much could you save by switching mortgage?
Someone who has a mortgage of €250,000 left, is paying a 4.3% standard variable rate, and has at least 20% equity in their home could save around €250 a month, or €3,000 a year, by switching to the cheapest rate on the market. That's a lot of tax-free cash for your wallet!
And while there are some upfront costs associated with switching mortgage provider, in many cases banks will provide cashback to those who switch or a contribution towards the legal fees.
Is switching mortgage an option for everyone?
Each bank has its own set of criteria for accepting mortgage switchers and if your financial circumstances have changed since you qualified for your initial mortgage, you may have problems switching.
However if you look to switch mortgage and don't get accepted, your current lender won't treat you any differently. So there's no need to worry if you get rejected. Nothing ventured nothing gained as they say!
In general, before switching, you must consider factors such as:
The outstanding balance on your mortgage. The minimum amount accepted by Irish banks for someone switching is around €30,000. Anything less and the bank will feel it won't be worth the time.
Whether you have a fixed-rate contract with your current lender. You may be charged penalty fees for switching out of a fixed-rate contract early so you may need to wait until the end of the term before you can consider switching.
Your credit rating. You must still have a good credit rating. A credit check will be carried out by the lender you’re trying to switch to and if you’ve taken out loans or used credit cards and had difficulties repaying these, you may have problems switching.
- How much equity is in your home. You may have difficulty switching if you are in negative equity or have less than 10%.
- The term remaining on your mortgage. You may not be able to switch if you only have a few years remaining on your mortgage as again the bank may feel it won't be worth the time.
The easiest money you'll ever earn is the money that you've saved as they say. And who wouldn't like some extra hard earned cash in their pocket?
So take the bonkers.ie Switching Challenge and start switching and saving today.