Switching mortgage provider takes some time and effort, but the financial upside can be big – so it’s worth understanding what’s involved and whether it makes sense for you.
When you switch mortgage provider, you are asking a new bank to take over the loan associated with you and your property. Obviously any new lender wants to know about you and your property (before they agree to take over the loan). Provided your current loan arrangement is in order, and there’s been no significant adverse changes to your personal circumstances, or the property itself, the switching process can be quite straightforward.
Here are the key steps in the process:
Step 1: Check your Current Deal (& compare)
Get out your current loan documentation and check the terms associated with your loan. A key piece of information is the ‘rate’ associated with your loan arrangement. If your loan interest rate is ‘fixed’ there may be a penalty charge or fee to break this fixed term (& move to another provider). If your loan is on a ‘variable’ rate, this penalty or charge does not apply.
Once you know the interest rate applicable to your loan (not the APR), and you know the loan amount outstanding (& years remaining on loan), you have the core information needed to “compare” offerings provided by others in the market.
Here’s a sample ‘switch calculator from Bank of Ireland here:
See what you could save each month/per year – and also see if there are other incentives being offered by others, to switch.
Step 2: Get detail from new preferred lenders
If the calculations make sense, speak to one or several of the alternative lenders in the market – ask about payment options and any other promotional offers they may have (for switchers). Sometimes lenders also have dedicated ‘switching teams’ which guide you through the process at every stage.
You could also notify your current lender to the fact that you are considering leaving – as a ‘retention’ offer could be made to you (i.e. an improved rate or condition associated with your loan)
Step 3: Some Paperwork & Time
Before any new bank or loan provider agrees to take over your mortgage, they will obviously need to formally approve your loan request – so there will be financial evidence required and application forms to complete (e.g. information about you, your salary, your current savings and loans, and information about the property itself).
Getting this information together may take several hours in total (to gather and organise), but remember the financial reward, in return, for taking this time.
Step 4: Approved – What Next?
Once your application to switch mortgage has been approved (by your new lender), it is decision-time. Again this could be another opportunity to challenge your existing lender for a better deal (with a clear ultimatum that you have an approved application to switch elsewhere).
If you decide to make the switch, and sign the new loan offer, the ‘bank-to-bank’ paperwork can take several weeks to complete. This process is organised and managed between your solicitor and the bank parties (typically the time delay relates to the transfer of property deeds between banks).
The new lender will also ask you to ‘re-assign’ any Life/Home Insurance policies to them and setup ‘monthly payment’ direct debit arrangement. The new lender team will guide you through how to do all of this, and it is quite straightforward.
Steps 5: What about costs?
There are generally offers or incentives, from new lenders, which cover the costs associated with switching your mortgage – so it’s important to check out the relevant promotional offers (when first looking at alternatives; Step 1)
There are generally 3 types of cost associated with switching your mortgage:
1. Property valuation fee (this is typically between €250-€300)
2. Legal fees and other potential legal charges
(these fees can be 1.5%-2% of the mortgage loan amount).
3. If your current mortgage rate is on a fixed rate (not variable rate), and not at the end of the fixed term period, a fee to cover the cost of breaking your fixed rate may apply. The charge will vary depending on the amount owning and the ‘fixed term’ remaining on your current loan.
Some time for big payback
The bottom line is that many people that could switch and save money do not get around to doing it. Switching mortgage does take some time and effort – but the reality is that, for a small number of ‘hours’, you can make significant monthly and annual savings by making the move. At a minimum, people should review ‘Step 1’ and at least see what they could be saving financially (before making the next move.).
Mortgage Store Switching Team
The Mortgage Store team are there to make the switching process as smooth as possible for you. Why not call us at 1890 365005 to see what options are available to you?