Key Post Switch or re-fix my mortgage? Breakage fee calculator and savings estimates for your case (Ireland)

Godders said:
Wow. That’s brillian. Thanks Paul. Big difference between €22,000 and €400! I won’t pretend to understand why… but I will chase it up with KBC and let you know how I got on.
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Hi Paul, the letter arrived from KBC yesterday. Posted on the 15th with 10 working days to accept . The break fee is 0 - which is nice.

Thanks again
 
This is so great, thank you!

I think I will go for a 7 year fixed rate with Avant at 2.05%. I am not trying to save monthly outgoings, I am mostly trying to secure a good fixed rate for a long period. I expect the next few years will be tumultuous and having a fixed rate will be beneficial. I'm deciding against 10 years instead because if I did decide to switch from Avant because of better market conditions I'd rather have had the lower rate of interest during the period I stayed with them. Here's hoping I'm not back in a decade regretting that choice.

I assume with Avant, as I am with EBS, I can break the mortgage anytime so if better rates come on the market I can make that change and do this same exercise again.

You only need a broker when switching to certain lenders (Avant and Finance Ireland, for example). You always need a solicitor if switching lenders. Shop around for a lower solicitor quote – €1,300 all in should be achievable.
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I haggled him down to €1,475, and as he did my mortgage and I like working with them, going to stay with them.

Great, it's with Irish Life so optimistic it can move easily, thank you.


Another question I have is about splitting the mortgage. I know you can split it by rates (some on fixed, some on variable). Is it possible to split it by banks (100k with EBS, 160k with Avant)? In an optimistic scenario, I might have a 200k payout (after taxes) from company shares in the next 12-18 months, and if so I'd like to pay half of that off the mortgage. Avant only allow overpayment by 10% per year (I could do 26k over four years but that doesnt seem efficient). I guess I could pay a penalty to over pay and it would be worth it at that rate. The reason I mention keeping 100k with EBS is because my current terms allow me to overpay with no charges (I paid 50k last year as mentioned)
 
Got a reply from EBS:

It is a block policy which is paid with your mortgage the premium is Eur 40.45 per month.
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Your post says block policies cant move, but the thread has folks saying they could, so will wait to hear back from EBS.

Just gonna have a rant about the life insurance. I have to pay a premium because I am 20 stone and 5'8''. Simply because I am fat. Doesnt matter that I am fit, healthy, hike / swim / and am active, or that I eat well and have access to private healthcare etc, all things that are better indicators of my health than simply my weight. So now if moving it means I have to go through the embarrassing process of talking to a broker again, and it boils my blood.
 
HonestlyTho said:
I assume with Avant, as I am with EBS, I can break the mortgage anytime so if better rates come on the market I can make that change and do this same exercise again.
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You are always free to switch to another lender at any time, but you may have to pay a break fee, and you will have to pay solicitors' and valuation fees.

Note that this post suggests that Avant will not let you switch to a different Avant rate while you are in the middle of a fixed rate – you have to wait until your fixed rate expires.

HonestlyTho said:
Is it possible to split it by banks (100k with EBS, 160k with Avant)?
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I believe there is nothing in law to prevent this, but I'd say that it is highly unlikely that any lenders would entertain the idea.

Remember that the penalty (which is calculated in the same way as the break fee but pro rata) can often be low or even zero. If interbank rates rise between the time you fix and the time you overpay, the penalty will be zero.
 
Godders said:
Hi Paul, the letter arrived from KBC yesterday. Posted on the 15th with 10 working days to accept . The break fee is 0 - which is nice.
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If you are planning to switch to another lender, you may want to consider "locking in" your zero break fee in case it rises.

You can do this either by
  • switching to KBC's variable rate (3.0% but it could rise at any time), or
  • switching to a relatively short fixed-term rate, e.g., 2.5% fixed for 1 year or 2.25% fixed for 2 years
ahead of the move to another lender.

Switching to a short-term fixed rate does not eliminate the possibility of a future break fee (when you move to another lender) but on average it reduces the possible size of any break fee.

On the other hand, if you want to stay with KBC, you can ask to re-fix on one of their lower rates, e.g., 3 years fixed at 2.25%, or 5 years fixed at 2.4%.
 
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As discussed in the below thread, it is quite likely that you will be able to overpay without limit for the foreseeable future, although it would be safer to check before any overpayment:

Overpayment / re-fix flexibility of AIB's green 5yr fixed rate (and some other rates)

Moderator's note: Because of a quirk in how AIB calculate their break fee / early redemption charge, you can make unlimited overpayments on some of their fixed rates without penalty. Or you can break out of your existing AIB fixed rate and re-fix on a different rate, again without penalty. (You...
www.askaboutmoney.com

When you get your loan-to-value (LTV) ratio below 50%, you will be eligible to switch to the 2.1% rate (if AIB are still offering it by then). If you think your property is worth more than €420k, you could ask AIB to perform a fresh valuation in order the shorten the time for your LTV to drop below 50%.

E46-Munster said:
I'm maxed out on monthly pension contributions, don't have any other debt and have money set aside for investment through a broker. Is there anything I'm missing other than missing out on the utility of the extra cash?
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Your priorities should usually be:
  • Paying off expensive debt (credit cards, personal loans, car loans, etc.)
  • 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; buying a car; childcare; adult children going to college, etc.)
  • Maxing out your pension contributions (very large tax relief is given)
  • Overpaying your mortgage (or possibly investing, but only if your investment horizon is at least 5 years, ideally 10)
in approximately that order. Consider posting a thread about your situation in the Money Makeover forum.
 
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Couple of updates.

Spoke to AIB on the phone and person I spoke to was interested until I brought up the BLT and then they wanted statements, lease agreements etc before they would even give me a verbal 'it's a runner or not'.

Letter from UB arrived confirming no breakage fee and another letter with rates form, showing 2.2% 5 year fixed option.

Am just going to go with this now and avail of the PTSB credit a/c for over payments till the 5 years is up and then look to switch.
 
Paul, thanks for your detailed response. KBCs letter dated 27 April 2022 confirmed the break fee of zero; which is valid for 10 working days. I’m currently collecting the docs for a broker to look to switch. Thanks for the insight.
 
Hi Paul,

NEW ONE
  • Current lender: Bank of Ireland
  • Outstanding mortgage balance (how much you still owe): €219,353.31 on 29 Apr 2022
  • Approximate value of your property: Paid €285,000 in Jan 2018 off plans, conservative estimate €330,000 today, fair estimate worth €350,000 today,
  • The date you started your fixed-rate mortgage (month and year): 26 Nov 2018. Rate expires on 26 Oct 2023.
  • How many years you fixed for: 5
  • Your current mortgage interest rate: 3.0%
  • Your current monthly repayment (excluding any overpayments): €913.60 standard repayment, making the allowable 10% overpayment of €91.36 on top of this also.
  • Your property's BER (Building Energy Rating): A3
  • Are you due to get extra cashback from your current lender in the future: Yes, I confirmed today with BOI that I will receive 1% of the €237,500 I borrowed. Due €2,375 cashback at the end of the fixed period.
I also confirmed with BOI today that the break fee is €835.

Questions:
  • Does the break fee seem correct? I may call back for a breakdown of the figures.
  • Assuming break fee is correct, is there more sensible options in the market to break and move to given the cost of €835 plus the opportunity cost to receive the 1% cashback (€2375)?
 
Hi
Heres my details.
  • Current lender KBC
  • Outstanding mortgage balance (how much you still owe) 178K
  • Approximate value of your property 400K
  • The date you started your fixed-rate mortgage (month and year) SEPT 2017
  • How many years you fixed for 10 YEARS
  • Your current mortgage interest rate 2.99%
  • Your current monthly repayment (excluding any overpayments) €954
  • Your property's BER (Building Energy Rating) – check it here or estimate it if necessary B3
  • Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when NO
 
My estimate of your break fee is very similar to Bank of Ireland's quote (€835). Bear in mind that it is volatile because wholesale interest rates are volatile.
  • Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €5,780 over the next 4 years

  • Switching immediately to Avant Money's 7-year fixed rate (2.05% with no cashback) will save you about €3,320 over the next 4 years – but with the longer security of 7 years on a fixed rate

  • Switching immediately to Avant Money's 10-year fixed rate (2.2% with no cashback) will save you about €2,060 over the next 4 years – but with the even-longer security of 10 years on a fixed rate

  • Switching immediately to Finance Ireland's 10- or 15-year fixed rate (2.55% with no cashback) will leave you worse off by about €900 over the next 4 years – but with the even-longer security of 10 or 15 years on a fixed rate
    • This product has a benefit in relation to moving home in the future that is explained below
    • And your interest rate (initially 2.55%) will automatically fall as time passes and you move into lower loan-to-value (LTV) brackets. See the section "How we decide rate reductions" on this page.

  • Switching immediately to Bank of Ireland's 5-year fixed rate (3.0% with the 1% (€2,375) cashback) will leave you worse off by about €1,000 over the next 4 years. But it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).

These savings estimates use for comparison the scenario of switching to the 3.0% rate with Bank of Ireland when the current fixed rate ends. And that's assuming that Bank of Ireland are even offering a 3.0% rate in October 2023 – it could be higher (or lower). You would get the Bank of Ireland €2,375 future cashback in such a scenario, and the savings estimates account for this. The estimates also account for any fees (break fee, solicitors' fees, valuation fee) that you have to pay and any cashback offered by the above lenders.

The savings estimates also assume that you consider €1,005 to be your normal monthly payment to Bank of Ireland. This means that your mortgage (whether with Bank of Ireland or with one of the above lenders) will be paid off in about 26 years. If you want estimates based on a monthly repayment to Bank of Ireland of €913.60, let me know.

All of Avant's rates, and Finance Ireland's 10-year and longer fixed rates, allow you to avoid any potential break fee if you move home in the future (as long as you take out a new mortgage with them, and subject to certain conditions). And in the case of Finance Ireland you can "take your mortgage with you" – meaning that you get to keep the same interest rate when you move (again, subject to certain conditions).

The estimates also assume that your loan-to-value ratio (LTV) is currently 219.4k/350.0k = 62.7%. A slightly higher property valuation (€366k) and/or a few more monthly mortgage payments and/or a small overpayment would get you into a lower LTV bracket (< 60%), and you would be eligible for lower rates from Avant Money and Finance Ireland. But that is probably not a good reason to delay the switch – i.e., you can start the switch immediately.

Paxton said:
Assuming break fee is correct, is there more sensible options in the market to break and move to given the cost of €835 plus the opportunity cost to receive the 1% cashback (€2375)?
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The above savings estimates for switching to another lender compare the scenario of switching lender to the scenario in which you stayed with BOI and did collect the 1% cashback in late 2023 – i.e., the fact that you will miss out on the 1% cashback by switching is factored in to the estimates. It does not seem like it is worth waiting ~18 months for the 1% cashback.
 
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Your break fee should be zero at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with KBC (and please post it here when you receive it, including the date of the letter). In your case, the break fee is extra volatile because there is so long left on your fixed rate.
  • Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €7,200 over the next 4 years

  • Switching immediately to Avant Money's 7-year fixed rate (1.95% with no cashback) will save you about €5,480 over the next 4 years – but with the longer security of 7 years on a fixed rate

  • Switching immediately to Permanent TSB's 4-year fixed rate (2.05% with 2% monthly cashback) will save you about €5,400 over the next 4 years
    • Note that Permanent TSB discriminate between new and existing customers, i.e., their best rates are not available to existing customers
    • For example, if you were an existing Permanent TSB customer, the best rate you would be able to switch to today is 2.8%
    • So if you switch to them now, you will not be eligible to switch to one of their low rates in the future and you will end up on a higher interest rate. When that happens, you may want to switch again to another lender, which will incur costs (and it might be impossible to switch if your financial situation has deteriorated).

  • Switching immediately to Avant Money's 10-year fixed rate (2.1% with no cashback) will save you about €4,480 over the next 4 years – but with the even-longer security of 10 years on a fixed rate

  • Switching immediately to KBC's 5-year fixed rate (2.4% with no cashback) will save you about €3,820 over the next 4 years. And it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).
    • Note that if you decide to do this, your mortgage move will soon move onto Bank of Ireland's books, and they discriminate between new and existing customers, i.e., their best rates are not available to existing customers
    • For example, if you were an existing Bank of Ireland customer, the best rate you would be able to switch to today is 3%
    • So if you switch to this KBC offer now, you will not be eligible to switch to one of Bank of Ireland's low rates in the future and you will end up on a higher interest rate. When that happens, you may want to switch again to another lender, which will incur costs (and it might be impossible to switch if your financial situation has deteriorated).

  • Switching immediately to Finance Ireland's 10- or 15-year fixed rate (2.4% with no cashback) will save you about €2,480 over the next 4 years – but with the even-longer security of 10 or 15 years on a fixed rate
    • This product has a benefit in relation to moving home in the future that is explained below

These savings estimates use for comparison the scenario of doing nothing. The estimates also account for any fees (solicitors' fees, valuation fee) that you have to pay and any cashback offered by the above lenders.

All of Avant's rates, and Finance Ireland's 10-year and longer fixed rates, allow you to avoid any potential break fee if you move home in the future (as long as you take out a new mortgage with them, and subject to certain conditions). And in the case of Finance Ireland you can "take your mortgage with you" – meaning that you get to keep the same interest rate when you move (again, subject to certain conditions).

If you are considering switching to another lender and you want information on "locking in" the current break fee, let me know.
 
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Thank you so much for this. I will have to get the ball rolling. Pricing solicitors before I engage their services.
To be honest, I would be erring towards making a slightly larger monthly repayment resulting in a shorter term. We initially took out a 35 year mortgage but I really want to reduce the term.
I was thinking of perhaps repaying over 17 years as opposed to 22. I’m guessing it would save us a huge amount in the long run.
 
Hi all

Wondering if you can give me some advice on what the break clause would be for me in the below situation?

  • Bank of Ireland
  • 357,000 Outstanding balance
  • 630,000 Approximate value of your property
  • Nov 2015 start date of fixed rate mortgage
  • 10 year fixed
  • 4.2% interest
  • 1865 currently monthly payment
  • B1 BER
  • No cash back due
Edit to say this is for a house sale and no repurchase

Many thanks
 
Your break fee should be zero at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with Bank of Ireland (and please post it here when you receive it, including the date of the letter).

You may want to consider "locking in" your low break fee in case it rises.

You can do this either by
  • switching immediately to Bank of Ireland's variable rate (3.9% but it could rise at any time), or
  • switching immediately to a relatively short fixed-term rate, e.g., 2.9% fixed for 1 or 2 years
ahead of the sale.

Or you could do nothing and hope that the break fee is still low when you sell.

Switching to a short-term fixed rate does not eliminate the possibility of a future break fee (when you sell) but on average it reduces the possible size of any break fee.

And of course switching to a lower rate will save you money. Your monthly repayment would drop to €1,612 on the 2.9% rate.
 
First of all, I should mention another possible option, which I left out of the previous post:
  • Switching immediately to AIB's 5-year green fixed rate (2.1% with €2,000 cashback) will save you about €6,440 over the next 4 years
The reason I mention it is because of the overpayment flexibility it offers.

You are correct that reducing the term of your mortgage will save you a huge amount in the long run, but the advice on this site is that you should almost always maintain the longer term but regularly overpay on your mortgage. (See this thread.) By doing so, you will still make the same very large savings but you will have the flexibility to stop the overpayments at any time. If you had instead signed a contract for a shorter term, you would be obliged to make the higher monthly payment every month, which could stretch you financially at some point in the future.

Of course, this approach requires you to choose a mortgage product that allows large overpayments without penalty. With regard to the lenders you may be considering:
  • Haven do not allow any overpayments without penalty
    • Note that the penalty is calculated in the same way as the break fee but pro rata, so it is possible for the penalty to be low or even zero, but we can't know with certainty if that will be the case
  • Because of a quirk in how they calculate their break fees, AIB's green rate will allow you to make unlimited overpayments without penalty for the foreseeable future (though if certain rates change, this benefit will go away)
  • Avant and Finance Ireland allow you to overpay by 10% of the mortgage balance(not just 10% of the monthly payment) per year
    • This means that you could overpay by up to €18k in the first year, and slightly less in each successive year
    • Note that with Avant, you can only make up to two overpayments per calendar year, so you would have to save up your overpayments and pay them as lump sums
Here is a calculator showing your current mortgage (without any monthly overpayment). If you play around with the figures (interest rate and loan term), you can see how much you would save for a given regular overpayment. But remember the advice not to shorten your contractual mortgage term.

Remember also that overpaying your mortgage may not be the best use of your money. 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; childcare; adult children going to college, etc.)
  • Maxing out your pension contributions (very large tax relief is given)
  • Overpaying your mortgage
in approximately that order.
 
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Thank you so much for that. I had noticed that AIB hadn’t featured in the initial response. I really appreciate the amount of time you have invested in this.
I think AIB is looking like the front runner. I need to get the ball rolling on gathering paperwork for our application. I will contact BOI for our breakout fee in the coming days.
 
Hi Paul

Just recieved the Break Fee letter from KBC and it is zero.

Thanks
Andy
 
Hi Paul

We are still looking at our options and i decided to get a fresh break free quote from UB, it has gone from nearly 2.5k to 758 euro in about 8 weeks.

I know its a crystal ball gazing exercise but it does seem like the trajectory is going only one way?
 
Hi Paul
Heres my details.
  • Current lender KBC
  • Outstanding mortgage balance (how much you still owe) 139K
  • Approximate value of your property 355K
  • The date you started your fixed-rate mortgage (month and year) Nov 2018
  • How many years you fixed for 10 YEARS
  • Your current mortgage interest rate 2.99%
  • Your current monthly repayment (excluding any overpayments) €718
  • Your property's BER (Building Energy Rating) – check it here or estimate it if necessary C1
  • Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when NO
 
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