According to the Central Bank of Ireland, the majority of Irish homeowners could save between 1, 200 and 3, 600 euros a year by making mortgage switch. This was confirmed by MyMortgages.ie, one of the leading Mortgage Brokerages in Ireland.
What is mortgage switch?
A mortgage is a long-term loan that finances a property purchase. It is a form of debt that is surrounded by legal properties – the borrower is obliged to pay back with a predetermined set of payments. Taking a mortgage either for the first time or the umpteenth time is a daunting task. From choosing the best lender and mortgage rate to getting the paperwork in order, the mortgage process is a long journey that requires careful consideration. However, this is nothing in comparison to mortgage switching. This usually occurs when your mortgage term is coming to its end. At this stage, there are two main options. You can either renew your mortgage term with the same lender or take your mortgage to a new lender. The latter is known as mortgage switching and it is twice as complex as taking a mortgage for the first time.
Experts predict high rate in mortgage switch by 2018
Leading lenders in Ireland such as Ulster Bank, AIB, and EBS have been cutting interest rates for the past few months. This, according to mymortgage.ie, can make consumers switch providers by 2018. It is not surprising as mortgage switching can prove to be greatly beneficial to the majority of customers in Ireland. According to research, the average borrowers could save between 40, 000 and 100, 000 euros in their lifetime by switching mortgage lender. The head of Credit at MyMortgages.ie, Joey Sheahan, says that sticking to one mortgage lender for 20 to 35 years is not the best of decisions. He believes that mortgages should be reviewed every 3 years just like any other financial products.
Most homeowners aren’t aware of mortgage switching
Although a mortgage is one of the biggest monthly expenditures, most borrowers are not aware of mortgage switching and its benefits. People fail to do enough research on the best rates and market value. Joey Sheahan blames a total lack of awareness for this. Consequently, there are many borrowers who are unnecessarily paying more than 3.6 percent in interest. Yet they could be in a better position and paying better interest rates if they had simply switched lenders. Furthermore, there is less paperwork in switching mortgage deals and it is hassle-free if you select the right lender.
Who can switch mortgage?
Switching mortgage can be difficult and expensive for borrowers who are on fixed rates unless they have a Loan-to-Value (LTV) of less than 80%. Borrowers on a fixed rate may be charged a penalty fee, also known as a redemption fee, by their respective lenders. On the other hand, it is easier to switch lenders if you are on a variable rate mortgage.
It will be difficult to switch if you are in negative equity. This is because many lenders won’t approve your application if you owe more on your mortgage than your property is really worth.
Switching mortgage is a matter of a few steps
Switching mortgage consists of a number of procedures. It definitely takes some time and effort but it is worth in the end. The first step in switching mortgage is to get in contact with your existing lender and inquire about your current deal. You should have information on the terms and conditions associated with your loan. Make sure you know whether you are in a fixed or variable interest rate.
Secondly, it is important that you do some research on other lenders and their rates. You should bear in mind that a cheap rate is not always the best. Instead, consider the long-term benefits and your future needs.
As a third step, get in touch with a professional and qualified mortgage broker. They are in a better position than you to compare prices, rates, and deals. You can also hire a legal advisor so that you get expert advice on these issues. Besides, a legal expert will be able to help you get through all the legal sides of the transactions.
Switching a mortgage deal is a great step that requires meticulous attention. Do not hurry into anything before considering all the possible options and potential benefits. Choosing the best mortgage deal can save you a considerable amount of money every year.
Related articles published in Mortgage loan :
- New report warns of impending housing crisis
- More people are affected by tracker mortgage scandal
- The increase in the price of houses is pushing Ireland towards another housing boom
- Mortgage approvals are increasing once more
Image : Shutterstock