mortgage switching advice

E

eidole

Registered User
Messages
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Hi,

Bought my house back in 2009 with loan amount of €185,000 over 35 years.
Currently on a variable rate with EBS which is 3.7%.
Outstanding balance is €148,500 with 22 years to go and I think the LTV is less than 60% now.

According to the search I did on bonkers.ie the best rate seems to be 1.95% with either Avant or ICS. It seems I can save around €130 per month.
I have a pension which I am paying the maximum into and a decent amount of savings.

I have been trying different scenarios with dr karls calculator and I'm thinking of overpaying the mortgage every month if possible and maybe pay off some of the balance with a lump sum. For example, if I pay off a lump sum of €10,000 and overpay by €4300 per year I can reduce the term by 9 years and 10 months and save €17,141 in interest. Would this be a good idea or is it better to just pay a bigger lump sum off the balance and pay lower monthly payments? I want to do something sooner rather than later with all the talk of increasing interest rates. Also, should I fix for 5, 7 or 10 years?
 
eidole said:
Would this be a good idea or is it better to just pay a bigger lump sum off the balance and pay lower monthly payments?
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The more you overpay your mortgage the lower the cost to you. In the same way the sooner you overpay the lower the cost will be. The advantage of an upfront lump sum payment is you're getting the benefit straight away. Pay off what you can now than re-evaluate next month. Some months you will be able to make larger overpayments than others.

eidole said:
I want to do something sooner rather than later with all the talk of increasing interest rates. Also, should I fix for 5, 7 or 10 years?
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In my mind the choice of short Vs long term fixes comes down to peace of mind versus inflexibility.

The inflexibility argument had reduced with regulations covering break fees and many providers allowing for generous overpayments and or their own break fee caps. So the argument against fixing for longer are probably less.

If you thought you could pay off your mortgage in 5 years it would probably make sense to go with a shorter term. However you say even if you overpay you'll still have 12 years left so on balance. The other possibility might be if you're planning on moving home. So unless you're certain you'll be moving home within the period I'd lean towards fixing for as long as possible.
 
Thanks to everyone for the replies. I have fairly decent savings but they are just sitting in bank accounts not really earning anything at all. Should i increase the lump sum on the mortgage so?
I've heard from older relatives that they wouldn't pay too much off as over time the amount to repay seems less due to rising wages etc in the mean time. Is this still the case or is it still better to pay it off as fast as possible? Maybe we have different circumstances now?
 
eidole said:
Thanks to everyone for the replies. I have fairly decent savings but they are just sitting in bank accounts not really earning anything at all. Should i increase the lump sum on the mortgage so?
I've heard from older relatives that they wouldn't pay too much off as over time the amount to repay seems less due to rising wages etc in the mean time. Is this still the case or is it still better to pay it off as fast as possible? Maybe we have different circumstances now?
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Will you have a need for the money in the next few years?

If not, and assuming you have no other debt, a sufficient emergency fund, and are maxing pension contributions, you'll get a better return than leaving the funds in your bank account, with zero risk.

Just remember generally speaking you're locking the funds away until you sell the property.
 
mojoask said:
If not, and assuming you have no other debt, a sufficient emergency fund, and are maxing pension contributions, you'll get a better return than leaving the funds in your bank account, with zero risk.
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I agree with this. Your priorities should usually be:
  • Paying off expensive debt
  • Building up an emergency fund in a savings/current account (3 to 6 months' living expenses)
  • Saving money for any expenses you will have over the next few years (kids; adult children going to college, etc.)
  • Maxing out your pension contributions (very large tax relief is given)
  • Overpaying your mortgage
in that order.

As for which mortgage to switch to, you can get more info in this thread. If your BER is good, you could do a simple switch to EBS's new green rate. (You don't need to achieve any of the items on the above list before switching your mortgage – you should do that ASAP.)
 
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Paul F said:
I agree with this. Your priorities should usually be:
  • Paying off expensive debt
  • Building up an emergency fund in a savings/current account (3 to 6 months' living expenses)
  • Saving money for any expenses you will have over the next few years (kids; adult children going to college, etc.)
  • Maxing out your pension contributions (very large tax relief is given)
  • Overpaying your mortgage
in that order.

As for which mortgage to switch to, you can get more info in this thread. If your BER is good, you could do a simple switch to EBS's new green rate.
Click to expand...
I'd agree with that order, in fact I'm following it myself.

Just one other recommendation, you'll be given the choice whether to keep the term the same & reduce the repayment, or reduce the term, and keep the repayment the same.

You're usually better to do the former, as it gives you the flexibility to pare back the overpayment if/when your circumstances change.
 
I think I'm going to put in a bigger lump sum so before i try to switch and hopefully get approval from another lender. I think avant and ics allow generous overpayments as well. And keep the term as it is. Thanks so much for all the advice!
 
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