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

Paul F said:

@ifonly 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 Avant Money's 7-year fixed rate (1.95% with no cashback) will save you about €3,980 over the next 4 years
  
  
• Switching immediately to AIB's 5-year fixed rate (2.35% with €2,000 cashback) will save you about €3,920 over the next 4 years
  
  
• Switching immediately to Avant Money's 10-year fixed rate (2.1% with no cashback) will save you about €3,200 over the next 4 years – but with the 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 €2,960 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 €1,620 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.

It may seem like it is not worth switching to another lender but bear in mind that your mortgage will soon be owned by Bank of Ireland, whose rates are much higher than KBC's. So if you don't switch now, you might find that you really want to switch in a few years' time, at which point rates might be higher.

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 want savings estimates for longer-term fixed rates, or information about "locking in" the low break fee ahead of switching to another lender, let me know.

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HI Paul
thanks so much. Kbc called today to say break funding fee is 0 and forms are being sent to us. I am looking at moving to avant. We currenly have part of our mortgage on a variable rate and have been overpaying monthly by a substantial amount. Whilst i want the security of the fixed rate with the way things are going at the moment i also want the flexibility to over pay while we can. All i can find online for Avant is that is says you can overpay by 10% of loan balance per year. So can i clarify that if my loan balance is say 138000 in year 1 i can over pay by 13,800 - year 2 say its at 119,000 i can over pay 11,900 ?
Thanks a mil

ifonly said:

All i can find online for Avant is that is says you can overpay by 10% of loan balance per year. So can i clarify that if my loan balance is say 138000 in year 1 i can over pay by 13,800 - year 2 say its at 119,000 i can over pay 11,900 ?

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That's correct. 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.

If you want to overpay by more than this, you'll have to pay a break fee, which is calculated pro rata – i.e., if you have used up your 10% annual allowance and you are paying off another 7% of the outstanding balance, the break fee is only 7% of what the break fee would for paying off the full mortgage. Remember also that break fees can be low or even zero, depending on the change in interbank interest rates, but this can't be predicted with certainty.

Note that Avant are about to increase some of their rates (but not their 4-year fixed rate for the moment). But if your broker gets your application into Avant and accepted by 13 May (very difficult), you will be eligible for the non-increased rates.

Paul F said:

That's correct. 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.

If you want to overpay by more than this, you'll have to pay a break fee, which is calculated pro rata – i.e., if you have used up your 10% annual allowance and you are paying off another 7% of the outstanding balance, the break fee is only 7% of what the break fee would for paying off the full mortgage. Remember also that break fees can be low or even zero, depending on the change in interbank interest rates, but this can't be predicted with certainty.

Note that Avant are about to increase some of their rates (but not their 4-year fixed rate for the moment). But if your broker gets your application into Avant and accepted by 13 May (very difficult), you will be eligible for the non-increased rates.

Avant to raise 5-20 year fixed rates, but lowers 30 year rate to 2.5%! (May 2022)

Avant will raise their 5-, 7-, 10-, 15-, and 20-year fixed rates for applications received after May 13th. The increases are of the order of 20-to-30 bps. https://www.rte.ie/news/business/2022/0506/1296524-avant-money-to-increase-some-mortgage-rates/ Their 3- and 4-year rates will remain...

www.askaboutmoney.com

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Thank you. So as of this morning our situation has changed slightly and now i am unsure the best course of action. We currently have overpaid our mortage by around 22k -but not changed the mortgage term. my understanding is should we ever need to take some of that money back out we can do so under the terms. Today we found out my husbands job are making a number of redundancies, he is not currently impacted but the company is moving its operation to a cheaper country. which ultimatley means at some point in the next two years he will be made redundant. Now if we move our morgage to avant we would move it at the current balance and current term so therefore giving up the opportuntity to take out the 22k - in this situation is our best option to move to 5 year fixed with kbc in case we need to buffer ourselves for any gap in employment? i only work part time so my husband is main bread winner. any advice appreciated

ifonly said:

We currently have overpaid our mortage by around 22k -but not changed the mortgage term. my understanding is should we ever need to take some of that money back out we can do so under the terms.

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I heard something about this feature of KBC mortgages several years ago. Can you (or anyone else here) share a link to the T&Cs in relation to the feature? One concern I would have is that Bank of Ireland may not have to continue this when they take over your mortgage. (That will depend on whether or not it is part of your KBC mortgage contract – it might just be part of KBC's terms of business.)

Edit: It turns out that you only have this facility (to withdraw your overpayments) if you first took out your mortgage with KBC in about 2013 or earlier. @ifonly When did you first take out your mortgage?

In this thread (and here), user @gnf_ireland describes their long argument with KBC around being allowed to withdraw their overpayments. So, unfortunately, you may not be able to withdraw your overpayments.

You should check with KBC where you stand. If it is the case that you can't withdraw your overpayments, it makes less sense to stay with KBC.

Paul F said:

@PatrickJK 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).

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Letter arrived today - 6 days after it was sent, thanks An Post! - dated 6 May, there isn't actually mention of the break fee on the letter itself, but I called BoI again today, and as of today the break fee would still be zero. Will return it tomorrow by next day post, so I guess it'll be processed on Monday - I'll check again with them Monday morning.

Thanks again for your brilliant help!

PatrickJK said:

Will return it tomorrow by next day post, so I guess it'll be processed on Monday - I'll check again with them Monday morning.

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Are you re-fixing with BOI for 5 years at 3%?

Paul F said:

Are you re-fixing with BOI for 5 years at 3%?

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I'm still umming and awwing on this to be honest. I've been minded toward ten years (at 3.3%) and just really forgetting about it - and that would be less of an increase on my monthly repayment than I initially estimated - but I wouldn't say the 5 year is out of the question. A number of friends have suggested 5 years as a little more balanced.

PatrickJK said:

I'm still umming and awwing on this to be honest. I've been minded toward ten years (at 3.3%) and just really forgetting about it - and that would be less of an increase on my monthly repayment than I initially estimated - but I wouldn't say the 5 year is out of the question. A number of friends have suggested 5 years as a little more balanced.

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I can't tell you the right course of action but just bear in mind that switching to another lender is not as stressful as getting a mortgage the first time because there isn't really a deadline.

This is a bit of tricky one. 31.5 years left on the mortgage and 1.5 years remaining on a 5 year fixed. Paying 2.8 % with PTSB so I've been shopping around for better rates. Avant seem to be the best as I would prefer a long term fixed however they seem to only take 30 years as their max. So I was thinking of holding off a year, however we are expecting our first child in September. I know for a first time applicant, a child can significantly reduce your mortgage amount so some people were encouraged to try draw down before the child was born. Does the same apply for switching generally? Our salaries have probably gone up about 20k combined but I know future creche fees can wipe that all out.

Paul F said:

I heard something about this feature of KBC mortgages several years ago. Can you (or anyone else here) share a link to the T&Cs in relation to the feature? One concern I would have is that Bank of Ireland may not have to continue this when they take over your mortgage. (That will depend on whether or not it is part of your KBC mortgage contract – it might just be part of KBC's terms of business.)

Edit: It turns out that you only have this facility (to withdraw your overpayments) if you first took out your mortgage with KBC in about 2013 or earlier. @ifonly When did you first take out your mortgage?

In this thread (and here), user @gnf_ireland describes their long argument with KBC around being allowed to withdraw their overpayments. So, unfortunately, you may not be able to withdraw your overpayments.

You should check with KBC where you stand. If it is the case that you can't withdraw your overpayments, it makes less sense to stay with KBC.

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HI Paul
Thanks for that. I will ring KBC this morning and ask about withdrawing our overpayments. Mortgages really are a minefield!

We are currently on the AIB variable rate of 3.15%. With interest rates likely to go up we are considering fixing for 3 years at 2.55%.
The only complication is we may move house in around 18 months (exact timing is hard to pin down for personal reasons). The (A) X (U) X (D %) = € ERC formula on the AIB website only includes examples where someone is moving from a higher interest rate to a lower one. Is there a break out fee if we decide to sell after 18 months? IE is D% value 2.55% because we are paying off the mortgage early and effectively moving to an interest rate of 0%?

Brilliant thread!

My situation:

• Current lender: KBC
• Outstanding mortgage balance (how much you still owe): €197,970
• Approximate value of your property: €350,000
• The date you started your fixed-rate mortgage (month and year): September 2020
• How many years you fixed for: 2 years
• Your current mortgage interest rate: 2.3%
• Your current monthly repayment (excluding any overpayments): €976
• 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

I was quoted a zero break fee by KBC this morning (valid for 10 working days). I’m looking to move to a longer-term fixed rate ASAP.

Thanks for your time.

ifonly said:

HI Paul
Thanks for that. I will ring KBC this morning and ask about withdrawing our overpayments. Mortgages really are a minefield!

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User @gnf_ireland succeeded in withdrawing their overpayments even though they may not have taken out their mortgage in 2013 or earlier. (I'm not clear when they took out their mortgage.) This reason is because they (and others, perhaps you) had been sent misleading letters in subsequent years indicating that this facility was available. But they had to fight for it. So if you get a No from KBC today, you may still have a case (if you're prepared to fight).

blue_steel said:

We are currently on the AIB variable rate of 3.15%.

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Is there any chance that your Building Energy Rating (BER) is B3 or higher? See if you can find your cert here.

Paul F said:

Is there any chance that your Building Energy Rating (BER) is B3 or higher? See if you can find your cert here.

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There is no rating for our property unfortunately. Going by similar houses in the same same estate I think we would probably be a low C. I know there are good fixed rates out there but we have always valued the freedom of a variable rate even if it means paying €60 or €80 more a month. But obviously in the current atmosphere the possibility of large interest rate hikes on the variable have come into play.

Hi Paul! Would appreciate your thoughts on the following - likely looking to fix for a longer period due to recent news re: interest rates going up (although I recognise have just missed the Avant 1.95% boat)..

• Current lender: Bank of Ireland
• Outstanding mortgage balance (how much you still owe); €317,000 (but could put in lump sum of €17,000 now and switch to new balance of €300,000)
• Approximate value of your property: €450,000
• The date you started your fixed-rate mortgage (month and year): September 2021
• How many years you fixed for: 1 year
• Your current mortgage interest rate: 2.7%
• Your current monthly repayment (excluding any overpayments): €1,640.56
• 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? None

Appreciate your guidance!

Would appricate advise on my suitation please.
As i have only 18 months left on my 5 years fixed with 3,500 cashback should i hold on for the cashback or move and re-fix for another 5+ plus years to get the lower interest rate?


Current lender - Bank Of Ireland
Outstanding mortgage balance (how much you still owe) - 322,968.65
Approximate value of your property - 460,000
The date you started your fixed-rate mortgage (month and year) - Dec 2018
How many years you fixed for - 5 years fixed with 18 months remaning
Your current mortgage interest rate - 3%
Your current monthly repayment (excluding any overpayments) - 1510 euro
Your property's BER (Building Energy Rating) – check it here or estimate it if necessary - A3
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? - Yes 3500 cashback in Dec 2023

• Current lender: PTSB
• Outstanding mortgage balance (how much you still owe): 450K
• Approximate value of your property: 750K
• The date you started your fixed-rate mortgage (month and year) Nov 2020
• How many years you fixed for: 3 Years
• Your current mortgage interest rate: 2.5%
• Your current monthly repayment (excluding any overpayments): 1840
• Your property's BER (Building Energy Rating) – check it here or estimate it if necessary: A3
• 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? 2% cashback monthly

There is no breakage fee I suppose and I wonder if it's worth switching to a different lender to get a better rate(It's clear that the lowest rate ship has sailed)

Thanks in advance

Fantastic thread Paul.

• Current lender: KBC
• Outstanding mortgage balance (how much you still owe): 160k
• Approximate value of your property: 390k
• The date you started your fixed-rate mortgage (month and year) Jan 2021
• How many years you fixed for: 3 Years
• Your current mortgage interest rate: 2.25%
• Your current monthly repayment (excluding any overpayments): 1160
• Your property's BER (Building Energy Rating) – check it here or estimate it if necessary: D1
• 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? None

Rang today to get breakage fee. Looking to switch to Avant for 4 or 7 years. Was also looking at PTSB 4:year fixed but with KBC less than 2 years.

Could I also break and go back into 3 year fixed with KBC at 2.25 at no cost? Only figured out from reading this thread that it is a possibility.

Thank you in advance.

delta_bravo said:

This is a bit of tricky one. 31.5 years left on the mortgage and 1.5 years remaining on a 5 year fixed. Paying 2.8 % with PTSB so I've been shopping around for better rates. Avant seem to be the best as I would prefer a long term fixed however they seem to only take 30 years as their max. So I was thinking of holding off a year, however we are expecting our first child in September. I know for a first time applicant, a child can significantly reduce your mortgage amount so some people were encouraged to try draw down before the child was born. Does the same apply for switching generally? Our salaries have probably gone up about 20k combined but I know future creche fees can wipe that all out.

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Based on the details you provided previously, your break fee should be zero at the moment – but it is volatile because wholesale interest rates are volatile, so confirm it with Permanent TSB (and please post it here when you receive it, including the date of the letter).

• Switching immediately to Avant Money's 4-year fixed rate (2.05% with no cashback) will save you about €9,440 over the next 4 years
  • You would have to shorten your mortgage term to 30 years to be eligible for this rate
  • The monthly repayment would be €1,451
  
  
• Switching immediately to AIB's 4-year fixed rate (2.2% with €2,000 cashback) will save you about €9,300 over the next 4 years
  
  
• Switching immediately to Avant Money's 5-year fixed rate (2.25% with no cashback) will save you about €6,420 over the next 4 years
  • You would have to shorten your mortgage term to 30 years to be eligible for this rate
  • The monthly repayment would be €1,491
  
  
• Switching immediately to Avant Money's 7-year fixed rate (2.35% with no cashback) will save you about €4,920 over the next 4 years – but with the even-longer security of 7 years on a fixed rate
  • You would have to shorten your mortgage term to 30 years to be eligible for this rate
  • The monthly repayment would be €1,511
  
  
• Switching immediately to Avant Money's 10-year fixed rate (2.5% with no cashback) will save you about €2,660 over the next 4 years – but with the even-longer security of 10 years on a fixed rate
  • You would have to shorten your mortgage term to 30 years to be eligible for this rate
  • The monthly repayment would be €1,541
  
  
• Switching immediately to Finance Ireland's 10- or 15-year fixed rate (2.55% with no cashback) will save you about €1,960 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 Avant Money's "One Mortgage" (a 2.65% fixed rate with no cashback) will save you about €380 over the next 4 years – and the interest rate will remain fixed for the remainder of your mortgage term
  • You would have to shorten your mortgage term to 30 years to be eligible for this rate
  • The monthly repayment would be €1,572
  
  
• Switching immediately to Permanent TSB's 5- or 7-year fixed rate (3.0% with 2% monthly cashback) will leave you worse off by about €2,340 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 2.95% rate with Permanent TSB when the current fixed rate ends. And that's assuming that Permanent TSB are even offering a 2.95% rate in October 2024 – it could be higher (or lower). You would continue to get the Permanent TSB monthly cashback in such a scenario. 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).

Given that mortgage interest rates are rising, you are probably better off switching now instead of in a year. If you are considering Avant, the above estimates show that shortening your mortgage term to 30 years still leaves the monthly repayment lower than it is now (unless you fix for 30 years). One catch that I can think of, regardless of who you switch to, is that you may need up-to-date payslips just before drawdown, which might be in August. Ask yourself when you expect maternity leave to start and whether they will be available. That being said, maternity leave does not seem to be a problem for switching.

If you want savings estimates for longer-term Finance Ireland fixed rates, let me know.