You could make significant savings on your mortgage if you can switch to a lower interest rate. Since 1 January 2019, the Central Bank of Ireland has put new measures in place to make it easier to switch your mortgage.
Under the new measures lenders must
- Tell you about cheaper options 60 days before your fixed rate mortgage period ends
- Notify you, if you are on a variable rate (but not a tracker), if you can move to a cheaper rate due to a change in your loan-to-value ratio. You will need to provide an up-to-date valuation for this.
- Explain the pros and cons of any mortgage incentives such as cashback offers in a clear way
- Give you a comparison of how much your mortgage costs versus other options offered by your lender if you ask for one
- Give switchers all the information they need to switch including how long it will take
- Give you a decision within ten business days of receiving a completed mortgage application
If you are eligible to switch you need to consider
- Loan-to-value (LTV) ratio – how much you owe on your mortgage in relation to how much your house is worth. Lenders will consider the LTV ratio when you make your application. An up-to-date valuation is needed to get an accurate value of the property.
- Outstanding balance – if you have a small outstanding balance on your mortgage you may find it difficult to switch as lenders may have a minimum amount they are willing to lend.
- Negative equity – lenders may not be willing to take you on as a mortgage customer if you are in negative equity i.e. if you owe more on your mortgage than your property is worth.
- Mortgage term – minimum or maximum loan terms may apply when you are switching. For example, some lenders may not accept an application for a mortgage over 30 years or less than five years.
- Repayment history – whether you have been meeting your mortgage repayments over the previous 12 months and any other financial obligations will be considered as part of your new application. Lenders will examine your credit history as part of this.
- Fixed Term – If you are on a fixed rate and want to break out of it early, you may have to pay a fee, sometimes called a redemption charge. The cost of this charge should be weighed against potential savings that could be made by switching or alternatively you can wait until you are coming to the end of the fixed term and then switch.
In accordance with the provisions of the Consumer Credit Act 1995, the following are for your attention:
Warning: Your home is at risk if you do not keep up payments on a mortgage or any other loan secured on it. The payment rates on this housing loan may be adjusted by the lender from time to time.
Note: The above notice in respect of adjustments to repayment rates will not apply during any period when the loan is at a fixed rate.
In accordance with the provision of the Consumer Protection Code (CPC) 2012 the following are for your attention:
Warning: If you do not keep up your repayments you may lose your home.
Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.
The following warning applies in the case of variable rate loans:
Warning: The cost of your monthly repayments may increase.
The following warning applies in the case of fixed rate loans:
Warning: You may have to pay charges if you pay off a fixed rate loan early.
The following warning applies in the case of debt consolidation loans:
Warning: This new loan may take longer to pay off than your previous loan. This means that you may pay more than if you paid over a shorter term