Once upon a time, Ireland’s entire housing market descended into a massive ball of fire.
I’m sure you’re familiar with it.
It’s what sparked the recession back in the late noughties.
The arse fell out of the market, and the country went into a tailspin that only really started to recover properly in the last few years.
You could easily blame the bankers and the government who’d seen foreign borrowings grow from €15 billion to €110 billion in 2004-2008 in rollover schemes to fund building projects that wouldn’t sell for several years (or sell at all, as the case may be).
The worldwide market took a crash, and the Celtic Tiger let loose one last roar, keeled over and died.
It was grim for a good few years. One of the things that fell away, alongside property prices, was the habit of switching mortgages.
But switcheroos are back, and the banks are throwing money at you for your remortgage.
Money, money, money.
Or: switch and save.
Many mortgages are taken on a variable rate – which changes. The idea of switching is that you move your mortgage to the lender with the best variable rate, saving you a packet. Many lenders will also throw in incentives to get you to sign up with them.
In theory, it’s a straightforward idea: move your mortgage money to the lender with the best rate and save on that rate.
It’s a doddl!
You can indeed if you meet key criteria:
The terms aren’t wildly different from how you signed up in the first place. If you said ‘yes’ to all the above, you should be able to remortgage.
Of course, there are certain warnings you should heed as well – you know the ones most people ignore, but that would scare the bejesus out of you: you’ll lose your home if you don’t keep up your repayments; that the lender may adjust the payment rates from time to time; and to always check the rates that will apply after a fixed-rate period expires.
Know what you’re getting yourself into, essentially, because we all know what happened the last time we kept our blinkers on.
The truth is that there *is* money to be made in switching – but be smart about it.
Newish mortgage lender Avant Money has with 3, 5 and 7 years fixed rates from 1.95% if your LTV is less than 60% (i.e. you need a 40% deposit)
H/t to them for bringing competition to the market, which will spur the other lenders to drive down rates that are currently the highest in Europe.
To save you the hassle, I’ve taken a look at the best remortgaging offers that are currently available. Some of them may well wet your whistle and get you to move. Obviously, terms and conditions apply, so have a read of all the documents before you take the plunge.
(To be fair, given how much ‘cashback’ appears on the list, is there any surprise there are stipulations to the banks giving away free money? One of which, by the way, generally is that you might have to have a recent mortgage to benefit from some of the switch incentives.)
The first thing to do is to figure out your Loan to Value (LTV) ratio. In simple terms, this is the amount outstanding on your mortgage as a percentage of the current value of your house. If your mortgage balance is €200,000 and your house is worth €400,000, then your loan to value is 50%.
To get the current value of your house, you will need to get it valued, which will cost you €130/€150. You can get the current balance on your mortgage from the bank.
Once you have the LTV, you can shop around and check out if there are better rates on offer than you currently pay. Remember to check with your current bank, too, as they may match a rate on offer elsewhere. This is especially true if your LTV is low as they want to keep these mortgages on their books.
Switching to a new rate with your current bank is quicker and easier than switching to a new lender – no need for a solicitor to get involved.
This all seems grand in theory – but remember the insurance policy you took out as part of your mortgage? Yeah, you know your Mortgage Protection plan?
If you made the unfortunate mistake of taking it out with your bank, did they ever tell you what would happen if you tried to switch to another bank?
Sit back and listen up.
Like many things in insurance: it depends.
This time, it depends on two things: did you buy your policy with a broker or insurer, or did you buy it with your bank/lender?
If you got the policy with a broker/insurer, it’s a doddle, and you can take it with you.
The premium and level of cover won’t change once the amount you borrow and the term of your mortgage remain the same.
Yeah, this can be painful.
Let me explain so you can be ready for it.
Imagine you have a mortgage protection policy with Aviva that you have assigned/passed ownership to AIB.
You want to switch your mortgage to Avant for their sexy new fixed rates and you want to use your current mortgage protection policy.
However, AIB isn’t playing nicely. They won’t remove their interest/assignment on your mortgage protection policy until Avant clears the current mortgage.
But Avant can’t proceed with your mortgage without having mortgage protection.
From experience, the bank you are switching to will be happy to proceed as long as you provide evidence that you have an active mortgage protection policy in place.
They may also need a one-liner from your solicitor undertaking to assign the policy to the new lender as soon as the previous lender releases their interest.
If you bought a block policy, the bank would cancel it when/if you switch your mortgage.
So, you’ll have to apply for cover all over again, and it may cost you more, as you’ll be older than when you first took out the policy.
And if you’re not in good health, you’ll have to pay a higher premium, or you may not be able to get cover at all.
If you can’t get cover, you won’t be able to switch your mortgage. You’ll be stuck with your current bank.
Scoundrels.
So you know all that money you thought you could save, well it might be about to get awkward…unless you have the right help.
Not all heroes wear capes, my friend.
Provided you didn’t buy a block policy from the bank; you can switch your mortgage protection at any time.
If you have made a grave error already and bought from the bank, and it’s within 30 days of taking out your policy, you can get your premiums refunded.
Outside of the 30 days, you can switch insurers without penalty, and the bank can’t stop you.
From the Consumer Protection Website:
All you need to do is give the bank a copy of the new policy so they can assign it to your mortgage.
You must disclose any new health issues that have arisen since you took out the original policy. For this reason, you should never cancel an existing policy until you have a replacement policy ready to go.
Just in case, like.
If you’re switching mortgage and you bought your Mortgage Protection from a broker, it’s a doddle; you’re free to take that policy to your new lender.
However, if you bought a block policy from your bank, they will cancel that policy, so you need a new Mortgage Protection policy.
This time, if you are switching mortgage, be clever and make sure you buy your mortgage life insurance from a broker, so you don’t get caught out in the future!
If you don’t have a trusted broker, I’d be happy to help you sort out your cover.
Complete this short questionnaire, and I’ll be right back with a quote.
Or if you prefer, call me on 05793 20836, and we can get to work on saving you money.
Nick McGowan
lion.ie | making life insurance easier
As Ireland's leading life insurance broker, we specialise in comparing the rates and policies from the top five Irish life insurance providers and offering the very best value quotes to suit the individual needs of our clients. Our expertise lies in finding a suitable insurance plan for those with specific needs, be it a particular illness, occupation or claim history, we've got you covered in every sense!
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