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Switching your mortgage is easier than you think
Most of us know we can save substantially by switching mortgage lenders, so why don’t we do it? And by the way, we’re talking about saving enough to pay for the family holiday every year; over the lifetime of a mortgage, the savings could amount to €10,000 or more.
There’s something stopping us, and that something is the perception that it’s very difficult, way too time-consuming, and may not yield that much in savings after all the effort. That’s where SYS Mortgages comes in. After an initial conversation to establish whether switching would be worth your while, our mortgage specialists do all the heavy lifting. We use our in-depth knowledge of all the lenders in the Irish market to find the best new mortgage for you, and do all the paperwork, saving you time and hassle
Another way to look at switching is to see it as an opportunity to reduce the term of your mortgage. This may mean paying more each month but the reward is being mortgage free years earlier! If you don’t fancy working into your late sixties, talk to us today about switching to reduce your term.
Mortgage switcher; is it worth your while?
There are a few factors that will dictate if it’s worth your while switching. They are:
Interest rate and type
What type of interest rate are you on: fixed, variable, tracker, or interest only? If you are on a fixed rate and the term is due to expire, now is the time to look at other options. If you take no action, your loan will revert to the standard variable rate that your lender is offering, regardless of how competitive it is. It may still be worthwhile switching even if you are in the middle of a fixed-rate term. We will talk you through what to do in that case.
If you are on a variable rate, there may be a more competitive rate in the marketplace; we can advise you. Tracker rates are a legacy from a different time; if you are on a tracker mortgage, generally, our advice is to stay put. However, this will depend on your tracker base rate. These rates mirror the European Central Bank (ECB) interest rate and can only be raised when the ECB rate goes up, and only by the same amount. Of course, when the ECB rate goes down, your rate does too.
Loan to Value (LTV)
The LTV ratio is your outstanding mortgage balance as a percentage of the current value of the property. The LTV ratio helps loan providers determine the amount of risk they are exposed to. The higher the LTV ratio is, the higher interest rate you pay, because the lender is taking more risk.
Your initial mortgage interest rate would have been worked out on the basis of a very high LTV because you would have borrowed up to 90% of the value of the property, but after five or ten years of mortgage repayments, this will have come down. Your LTV can come down if the value of your property has increased (and let’s face it, most have), so for these two reasons, there is a good chance you will save by switching.
Do you need to borrow more?
You may have heard it said that your mortgage is the cheapest money you will ever borrow. This is because mortgage interest rates are lower than rates for any other type of loan. If you have outgrown your home, as often happens, and you want to build an extension or do some home improvements, you can take the opportunity of switching to negotiate a top-up mortgage at a more competitive rate with the new lender. Taking out a regular bank loan or credit union loan for the works could come at a significantly higher interest rate.
Do you have other loans?
Similar to the point above, if you have – or need – additional loans such as borrowings to fund your children’s education, you can, in some cases, merge these with the new mortgage and end up paying a lower rate of interest than you otherwise would.
The cost of switching
Bear in mind you will incur some expenses in the process of switching mortgage providers.
A solicitor will request the deeds of your property from your old lender and hold them while the paperwork is being completed. They will also oversee the signature of your new loan agreement.Some lenders cover legal fees for switchers. Our mortgage consultants will be able to advise you on this.
In order to calculate your new LTV ratio, the new lender will need an up-to-date valuation of your home.
As there is a substantial amount of paperwork involved in switching, we charge a fee for the service, however, in most cases, the financial incentive offered by the lender to switchers offsets this cost. For more information on our fees, please review our Terms of Business.