Key Post It may be much cheaper than you think to break out of a fixed rate early...

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Jimmy2times9999 said:
I have 7 years left of a 10 year fixed with KBC. Roughly 130k left.

Was quoted 7k breakage fee last week.

Is there a way to track the fee? I'd bite if it went under 2k
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Kind of but you have to do a calculation yourself and it will only give you an estimate.

Right now the estimate is 130000*(0.967-(-0.077))/100*7 = €9,500 approx

To do the calculation in future use this formula: B*(0.967-(R))/100*Y

where
  • B is your outstanding balance at that time
  • Y is the number of years left on the fixed-rate period (it doesn't have to be a whole number)
  • R is the interbank rate (estimate it using this; choose today's date, "EUR Rates 1100" and the number of years nearest to Y)
If you tell me the year and month when you started the fixed rate, I can give you a better estimate.

But long story short, your break fee won't drop much until today's rate gets closer to +0.967% or you get closer to the end of the fixed-rate period.

Also, what interest rate are you on? It can sometimes be worthwhile paying even a large break fee if it lets you switch to a much lower rate.
 
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Jimmy2times9999 said:
Current rate is 3.05%
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If your LTV is less than 60%, you may be eligible for the Avant 1.95% rates (depending on where you live). Your rate would drop by 1.1% and so you would save approximately 130000*1.1/100 = €1,430 in interest every year. It would cost you €1,000 to €1,500 solicitor's fees to switch, so the interest saved would start overtaking the costs (break fee + solicitor's fees) in about five and half years from now.

If you have a BER of B3 or higher and an LTV<=80%, you could apply for AIB's 5-year fixed Green Mortgage (2.1%). You would save approximately 130000*1.1/100 = €1,235 in interest every year. The €2,000 cashback would more than cover your solicitor's fees. The interest saved would start overtaking the costs in just under 5 years.

The good KBC rates are only fixed for 2 or 3 years, at which point you'd be at the mercy of Bank of Ireland's rates (assuming they buy KBC's mortgages), so switching to another KBC rate doesn't seem like a good idea.

Note: all of the above figures are only estimates so don't take them as gospel.

A few questions:
  • What is your LTV?
  • What is your BER (even if it's an estimate)?
  • How long is left on your mortgage?
  • When exactly did you fix (month and year)?
 
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Paul F said:
If your LTV is less than 60%, you may be eligible for the Avant 1.95% rates (depending on where you live). Your rate would drop by 1.1% and so you would save approximately 130000*1.1/100 = €1,430 in interest every year. It would cost you €1,000 to €1,500 solicitor's fees to switch, so the interest saved would start overtaking the costs (break fee + solicitor's fees) in about five and half years from now.

If you have a BER of B3 or higher and an LTV<=80%, you could apply for AIB's 5-year fixed Green Mortgage (2.1%). You would save approximately 130000*1.1/100 = €1,235 in interest every year. The €2,000 cashback would more than cover your solicitor's fees. The interest saved would start overtaking the costs in just under 5 years.

The good KBC rates are only fixed for 2 or 3 years, at which point you'd be at the mercy of Bank of Ireland's rates (assuming they buy KBC's mortgages), so switching to another KBC rate doesn't seem like a good idea.

Note: all of the above figures are only estimate so don't take them as gospel.

A few questions:
  • What is your LTV?
  • What is your BER (even if it's an estimate)?
  • How long is left on your mortgage?
  • When exactly did you fix (month and year)?
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LTV is about 40%
B3
22 years
July 2018
 
Jimmy2times9999 said:
LTV is about 40%
B3
22 years
July 2018
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In that case pretty much everything I said above still stands – except that it might take a few months longer than I estimated to reach "break even" on costs vs savings if you switched now.

You're eligible for Avant if you live in one of the cities+surrounding areas or towns named here.

Of course, you don't have to switch now. For each extra year that you wait, your break fee will drop by ~€1,000 (assuming there are no interest rate changes). But there is also no guarantee that the AIB and Avant rates will be the same in the future.

It's also possible for the break fee to decrease at a faster rate, or even increase. It all depends on interbank interest rates.
 
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Paul F said:
Your rate would drop by 1.1% and so you would save approximately 130000*1.1/100 = €1,430 in interest every year
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This is normally good enough for a quick comparison over 2/3 years but because the break even point is so far out, the declining principal needs to be accounted for when estimating the saved interest. I don't think switching to Avant actually breaks even before 7 years and the AIB option just about makes it. But I haven't fully worked it out

In fact if @Jimmy2times9999 has €7k available right now, a better approach would be to just make a lump sum overpayment saving €1.5k (7k x 3.05% x 7yrs) over the next 7 years.

The best approach to reducing the cost may be to just take advantage of KBC's 10% overpayment per year until such time that the break fee justifies a switch
 
_OkGo_ said:
This is normally good enough for a quick comparison over 2/3 years but because the break even point is so far out, the declining principal needs to be accounted for when estimating the saved interest. I don't think switching to Avant actually breaks even before 7 years and the AIB option just about makes it. But I haven't fully worked it out
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Here are calculators showing the year-by-year principal and interest payments:
Factoring in €1,000 in solicitor's fees for either switch and €2,000 cashback from the AIB switch, the breakeven point arrives in a tiny bit over 6 years for Avant and in a little over 5 years for AIB.

So either switch looks like a good idea to me, because you'll then be with a lender with rates in 5 or 6 years' time that will probably be lower than Bank of Ireland's (the likely buyer of KBC's mortgages).

A question then is when to switch. If interbank interest rates go up by 0.1% in the next few months, the break fee comes down by about €900. But if the rates go down by 0.1%, the break fee goes up by €900. Perhaps rates are on the way up (and @Jimmy2times9999 's break fee is on the way down), but who knows?

@_OkGo_ With KBC you can only make overpayments totalling 10% of the outstanding balance over the entire fixed-rate period, not 10% per year.
 
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Was in touch with KBC recently with regards a break fee, Balance €100065 2 years remaining on a 5 year fixed rate and was quoted €1744
I was hoping it would be a lot less as now with switching fees + Break fee moving to Avant wont make much sense
 
DamoCork said:
Was in touch with KBC recently with regards a break fee, Balance €100065 2 years remaining on a 5 year fixed rate and was quoted €1744
I was hoping it would be a lot less as now with switching fees + Break fee moving to Avant wont make much sense
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@DamoCork What is your current interest rate, number of years left on the mortgage, loan-to-value ratio and (estimated) BER?
 
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Mortgage one vs the other. can one of you guys or gals help me do the calculations please. I need to work out which is better over 5 years.

AIB

5 Year Fixed Rate >50% <80% LTV​

(2000 cashback)
2.15%

Green Rate

VS

HAVEN

Fixed 5 Year​

(5000 cashback)

2.55%
Fixed rate <80% LTV


Thanks
 
@Nowronganswer What is your mortgage balance and number of years left? If you are currently on a fixed rate, when did you fix and for how long (and with which lender)?
 
Sorry i was looking at 3 years down the line when my fixed rate is up,
PTSB
fixed in Jan 21 for 3 years. 30year term
2.95%
balance 282,515
29 years and 7 months left
 
DamoCork said:
Current rate 2.6 16.5 years remaining and LTV <50% BER C1 (estimate)
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AIB have a 2.35% rate for LTV<50% and they give €2,000 to switchers. Even 5 years from now, you'd be about €650 better off if you went to AIB than if you went to Avant. But the savings probably won't have offset your costs (break fee + solicitor's fees + valuation fee) even after 5 years, even if you go to AIB.

(These calculations don't take account of the possibility of BOI taking over your mortgage and jacking up the rates when your fixed rate ends. That possibility might be why you are considering switching.)

If you thought you had any chance of getting a B3 BER, you'd be eligible for AIB's 2.1% Green Mortgage (and the €2,000 cashback). That would be the best of all. Getting a BER cert costs €150 to €250 for most houses, but shop around. You'd be at breakeven in about 2 years.

In any case, your break fee will be about half of what it is now in a year's time, all other things being equal. But we don't know if the above mortgage offers will still be available then.
 
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Nowronganswer said:
Sorry i was looking at 3 years down the line when my fixed rate is up,
PTSB
fixed in Jan 21 for 3 years. 30year term
2.95%
balance 282,515
29 years and 7 months left
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If you switch to AIB, you will be about €3,000 better off after 5 years (compared with switching to Haven).

Note that the AIB green rate is actually 2.1% (not 2.15%).

You are not obliged to wait until your current fixed rate is finished before switching. But another lender usually won't take you until you have been with your current lender for at least 12 months. So you should be able to switch in Jan 2022, and your break fee could be low or even zero.
 
I am with Avant Mortgages. My rate is 2.2% fixed for three years. We're only on it since Jan 2021. Would it be possible to change/switch fixed term to 7 years with same bank? Has anyone done this? I may have to wait until I am there a year? Thanks
 
kingvagabond said:
I am with Avant Mortgages. My rate is 2.2% fixed for three years. We're only on it since Jan 2021. Would it be possible to change/switch fixed term to 7 years with same bank? Has anyone done this? I may have to wait until I am there a year? Thanks
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Because you are not switching lenders, I would be surprised if they make you wait a year. No harm in asking.

Because interbank interest rates have risen slightly since January, there should not be a break fee.

Do you have the possibility (by means of a lump-sum overpayment or increasing property value) to get your loan-to-value ratio below 70%? That would entitle you to the 2.1% rate (a saving of €300 per year on a €300k mortgage).
 
Paul F said:
Because you are not switching lenders, I would be surprised if they make you wait a year.
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Are you saying that a lender can stop you breaking out of a fixed rate?

I had never heard of that before. They can charge you a break fee but can they stop you breaking out and refixing?
 
Brendan Burgess said:
Are you saying that a lender can stop you breaking out of a fixed rate?

I had never heard of that before. They can charge you a break fee but can they stop you breaking out and refixing?
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No, I was more trying to say that although you are free to break out of a fixed rate at any time, a lender might not be obliged to offer you access to all of its fixed-rate offers.

I have no evidence that Avant do this but I was pondering the possibility.
 
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