Switcher Mortgages

Are you looking to switch lenders in order to benefit from a more advantageous rate? Then a Mortgage Switcher option may be the best for you.

Many people who choose to switch their mortgages do so because they have found another lender with cheaper interest rates or other financial incentives, like a cashback offer upon switching. Before you make the move, however, you need to determine if you are actually permitted to switch lenders. This would depend on:

• Balance remaining: If you only have a small balance of your mortgage left to clear, you might not be eligible to switch. This is because some lenders have a minimum loan amount you can borrow
• Mortgage term: If you are nearing the term of your mortgage, you may experience difficulties in finding lenders to switch to. Additionally, many have minimum or maximum terms that may be too limiting given your circumstances
• Negative equity: If the value of your home is less than the outstanding balance on your mortgage, the property is now in negative equity. This makes it harder to switch lenders
• Credit history: If your credit history is tarnished in any way by missed or late repayments, this will negatively affect your ability to switch your mortgage
• Fixed rate applicability: If you are currently on a fixed-rate mortgage agreement with your lender, you may be charged a penalty when you do decide to switch. This is usually known as a redemption charge or breaking fee
• Your Loan-To-Value (LTV) ratio: Your LTV ratio is the amount of money you owe the lender relative to the market value of your home. Lenders will offer lower interest rates to buyers who have a lower LTV ratio. Therefore, it only makes sense to switch mortgage providers if;
  • The market value of your home has increased: You will need to get an approved valuation of your home to assess this
  • The balance on your loan has reduced: As you pay off your mortgage, your outstanding balance will decrease as will your LTV. It may be most advantageous to switch once you have been paying off your mortgage for a couple of years
    • 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). Source: Switching your mortgage? review your options - CCPC Consumers
  • Your home’s Building Energy Rating (BER): If you have made energy efficient upgrades to your home and have been given a higher BER rating, you may be eligible for a ‘green mortgage’ which could potentially offer more cost-effective rates

Below we have laid out a Mortgage Switching timeline to help you gain a clearer grasp of the steps involved in the process:

1. Do your research and apply: Prior to applying for a switcher mortgage, ensure you have taken into consideration the costs associated with switching lenders (redemption charge if applicable, mortgage protection insurance etc). You can use our free mortgage calculator to get a preliminary estimation of how much you can borrow once you switch. Once this is done, it will be easier for you to work out the size of the mortgage you require. You can then come to us and we will assist you in submitting your application once all due diligence is carried out (selecting the most favourable interest rate for you, analysing all conditions and clauses set out by the lender, comparing different incentives offered etc).
2. Provide supporting documentation: The lender will need evidence that you can meet your mortgage repayments so you will have to give them access to your bank statements and end-of-year income tax returns. This will assist them in deciding on the outcome of your application.
3. Obtain Approval in Principle: Once you have secured your deposit, the lender will provide you with an Approval in Principle if they deem your application successful. Essentially, this an indication of how much you can borrow. It stays valid for 6 months, period during which you should have enough time to go house hunting.
4. Provide requested documentation and receive offer: The letter of Approval in Principle will list certain documents that you need to provide your lender with so that they can proceed with your application. These include details of your property as well as your solicitor’s details. As well as this, the lender will need a Valuation Report and proof of home and mortgage protection insurance put in place. Once they are satisfied everything is in order, they will issue you with a loan offer letter that you should review with us and your solicitor. You and your solicitor must sign this letter and send it back to the lender.
5. Begin drawing down on your mortgage: Assuming you have provided the lender with all the documentation outlined in the letter of offer and all other necessary steps are completed, your solicitor will begin drawing down on your mortgage on your behalf and transfer the funds to your previous lender in order to clear off your mortgage with them.