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

Thanks for all the above Paul!
I had resigned myself to the fact that I missed the boat on Avant's 1.95% 7-year rate anyway. That would have been nice! Fair dues to anyone who got that (as well as the switching bonus they were offering earlier in the year!). I moved way too slowly - I just assumed I'd have to wait until September. Anyway!
I happened to get a letter yesterday from Avant, apologising about the delay on the mortgage application decision (usually 10 business days) and if I don't hear from them within the next 30 days, they'll contact me with a further update! So basically, I'll be happy if I get the 2.25% rate from them at this stage!
I've e-mailed UB about getting the updated breakage fee\rates. The only positive of the delay might be that I have another mortgage payment gone through before any switch takes place.
I think I might take your advice and apply to a couple of other lenders too. I was talking to AIB briefly today and once you send in all the documentation, they're current turn around time is still 5 to 7 days. We'll see! Must check out Haven too. Am still trying to weigh up short-term gain versus longer term security, but heading towards longer time security....I think!!
Thanks again! Have a lovely weekend!
 
Indecisive.com said:
I was talking to AIB briefly today and once you send in all the documentation, they're current turn around time is still 5 to 7 days.
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For Approval in Principal maybe! But not for the full loan offer. Switching seems to take about 3 months from start to finish, on average.
 
@fixedratenovice Your break fee should be around €40 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).
  • Switching immediately to AIB's 4-year fixed rate (2.2% with €2,000 cashback) will save you about €6,900 over the next 4 years

  • Switching immediately to Haven's 5-year fixed rate (2.55% with €5,000 cashback) will save you about €5,680 over the next 4 years

  • Switching immediately to Haven's 7-year fixed rate (2.65% with €5,000 cashback) will save you about €4,460 over the next 4 years – but with the longer security of 7 years on a fixed rate

  • Switching immediately to Haven's 10-year fixed rate (2.85% with €5,000 cashback) will save you about €2,040 over the next 4 years – but with the longer security of 10 years on a fixed rate

  • Switching immediately to Avant Money's 7-year fixed rate (2.45% with no cashback) will save you about €1,820 over the next 4 years – but with the 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 €1,217

  • Switching immediately to Avant Money's 10-year fixed rate (2.6% with no cashback) will save you about €20 over the next 4 years – but with the 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 €1,241

  • Switching immediately to Bank of Ireland's 5-year fixed rate (2.8% and you would get the 1% (€3,270) cashback) will save you about €2,370 over the next 4 years. And it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).
    • This accounts for the interest rate discount offered by Bank of Ireland

  • Switching immediately to Bank of Ireland's 10-year fixed rate (3.1% and you would get the 1% (€3,270) cashback) will leave you worse off by about €1,270 over the next 4 years – but with the longer security of 10 years on a fixed rate. And it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).
    • This accounts for the interest rate discount offered by Bank of Ireland

  • Switching immediately to Finance Ireland's 10- or 15-year fixed rate (3.15% with no cashback) will leave you worse off by about €6,640 over the next 4 years – but with the 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 3.15%) 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.

These savings estimates use for comparison the scenario of switching to the 3% rate with Bank of Ireland when the current fixed rate ends. And that's assuming that Bank of Ireland are even offering a 3% rate in July 2022 – it could be higher (or lower). You would get the Bank of Ireland €3,270 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.

It is unlikely that you will be able to switch to another lender while you are on probation. But there is no harm in talking to AIB or to a broker who works with Haven to see what their attitude to your situation is.

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) really is below 80% so that you are eligible for the listed rates. Your LTV estimate is 310.0k/400.0k = 77.5%. If you get a valuation of less than €388k, you will need to make a few more monthly mortgage payments and/or a small overpayment to get the LTV below 80%. But that is not a reason to delay the switch – i.e., you can start the switch immediately.

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

Bear in mind that interest rates could rise between now and the time that you complete any switch, so if you are thinking of switching you should probably apply simultaneously to two or more lenders for approval in principle (AIP).

The break fee depends on:
  • Your outstanding balance
    • Notional interest doesn't come into it
  • How long is left on the fixed-rate period
  • The change in interbank interest rates (not mortgage interest rates) from when you fixed to now
    • BOI don't use the deposit rate in their calculations
The day that you fix, your break fee is zero. If interbank interest rates fall, your break fee rises; if interbank interest rates rise, your break fee falls (all other things being equal).

If you fix with BOI for 5 years, their cost of funding will be similar to this rate. If you fix with BOI for 10 years, their cost of funding will be similar to this rate.

If the relevant interbank rate (e.g., the 3-year rate when there are 3 years left on your fixed period) on the day you break is higher than BOI's cost of funding, your break fee will be zero. If it is lower, you will have a break fee.

Because the time left on the fixed-rate period is a factor in the break fee calculation, fixing for ten years can lead to higher break fee quotes, on average, than fixing for five years. But, as mentioned, break fees can also be low or even zero – it all depends on the change in interbank interest rates.

Bank of Ireland do not allow you to "take your mortgage with you" – only Finance Ireland offer this feature.
 
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bcc-orr said:
Paul thank you so much for this - I looked at the FYI and didn't notice an answer.
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Can you explain what you mean by the FYI? Do you mean the first few posts in this thread?

bcc-orr said:
If I break my fixed rate - am I transfered to the variable rate if I did not switch.
Or do I ask to break but not actually break until about to drawdown from the new lender?
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If you decide that you just want to re-fix with Bank of Ireland (instead of switching to another lender), you simply contact them and tell them that this is what you want to do. I'm not sure of the exact procedure for this with BOI – you probably have to tick the rate you want on a form and send it back to them – but you do not have to go onto a variable rate while the re-fix is underway.

If you are switching to another lender, you stay on your current fixed rate right up until you draw down the mortgage from the new lender. Then your solicitor tells BOI that you are paying off the mortgage in full. BOI then calculates the outstanding balance and adds on the break fee (if any) – this is the "redemption figure". Then the solicitor pays off the BOI mortgage with the money from the new lender.

@bcc-orr You should do what @fixedratenovice did: contact Bank of Ireland, tell them that you are planning to switch to another lender, and ask them what interest rate discount they would offer you to break and re-fix with Bank of Ireland. They offered @fixedratenovice a 0.2% discount to stay.
 
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I called UB on the 13th and requested the break fee. Called again on the 21st and was told it had been prepared on the 15th and should have been posted the following day. The letter with the break fee hasn't arrived yet but yesterday (24th) I received the letter with the rate options. It is dated 20 June and states that the rates are valid for 10 working days from that date so half of that period is already gone. I'll have to call them on Monday again.

Incidentally, the two UB advisors I spoke to assured me that the 10% overpayment facility would be retained after the transfer to PTSB. I pointed out that, strictly speaking, this feature is only mentioned on the mortgage information sheet (ESIS) and does not actually appear in the mortgage T&Cs (as far as I can tell) but they didn't seem concerned about this.

I was still doubtful but I have just noticed that the rate options letter includes the following statement (under Important Information):
"6. If you choose a new fixed rate you can make an overpayment of up to 10% of your outstanding fixed rate balance each calendar year without incurring an Early Redemption Charge."

I think that lends weight to the expectation that the feature will be retained.
 
@Frasier Crane Because the break fee quote has been generated, it should be possible for UB to tell you what it is over the phone. See @nephster's post in this thread.
 
@jim Your break fee should be zero at the moment – but confirm it with EBS. If it is higher than zero, please post it here when you receive it, including the date of the letter.
  • Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €6,940 over the next 4 years

  • Switching immediately to AIB's 5-year green fixed rate (2.1% with €2,000 cashback) will save you about €6,100 over the next 4 years
    • And it is quite likely that you will be able to make unlimited overpayments without penalty for the foreseeable future (see this thread)

  • Switching immediately to EBS's 4-year green fixed rate (2.1% with no cashback) will save you about €5,550 over the next 4 years. And it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).
    • Switching to this rate should NOT result in you missing out on the 2% cashback that you are due for taking out a mortgage with EBS – but confirm it with them (and get it in writing)
    • And there is a strong argument that you are entitled to the 1% cashback in five years' time – see this thread

  • Switching immediately to Haven's 7-year fixed rate (2.65% with €2,000 cashback) will save you about €1,400 over the next 4 years – but with the longer security of 7 years on a fixed rate

  • Switching immediately to KBC's 10-year fixed rate (2.85% with €3,000 cashback) will save you about €680 over the next 4 years – but with the longer security of 10 years on a fixed rate
    • Note that if you decide to do this, your mortgage 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 3.0%
    • So if you switch to this KBC offer now, you will probably 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).
    • You must apply by 15 July 2022 if you wish to switch to KBC. You would also have to apply for a current account with them by that date.

  • Switching immediately to Haven's 10-year fixed rate (2.85% with €2,000 cashback) will leave you worse off by about €320 over the next 4 years – but with the longer security of 10 years on a fixed rate

  • Switching immediately to Finance Ireland's 10- or 15-year fixed rate (2.9% with no cashback) will leave you worse off by about €2,780 over the next 4 years – but with the 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

  • Switching immediately to Finance Ireland's 20-year fixed rate (3.0% with no cashback) will leave you worse off by about €3,640 over the next 4 years – but with the longer security of 20 years on a fixed rate
    • This product has a benefit in relation to moving home in the future that is explained below

  • Switching immediately to Finance Ireland's 25-year fixed rate (3.15% with no cashback) will leave you worse off by about €4,940 over the next 4 years – but with the longer security of 25 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.

AIB and KBC only accept switchers once they have been with their current lender for at least 6 months, and Finance Ireland apparently have no minimum time period. Haven's rule is unknown. See this thread for more details.

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 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).

Bear in mind that interest rates could rise between now and the time that you complete any switch, so if you are thinking of switching you should probably apply simultaneously to two or more lenders for approval in principle (AIP).

jim said:
I have a seperate approval in principal with ICS at a rate of 2.4%(i think, its around that) and am wondering it makes sense to switch given that id probably have a break fee with ebs.
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That ship has sailed. ICS's rates are much higher now.

jim said:
Should i ask ebs what the break fee would be?
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Yes.
 
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Reactions: jim
I think I must of been the first post in this thread. Well, after many months my Avant switch went through last week, and the break was in fact zero. Locked it in for 7 years @1.95%. good timing considering where interest rates might be heading. Thanks for the help.
 
You were! So that's just under four months for your switch to Avant, during which time they increased their interest rates. Luckily the increases did not apply to you, but with most other lenders you cannot "lock in" today's rate when you start the switching process.

It shows the importance of applying to multiple lenders at once, and of giving consideration to re-fixing with your current lender (which is a much quicker process).
 
Thanks Paul, great detail there.
 
  • Current lender - AIB
  • Outstanding mortgage balance - 177K
  • Approximate value of your property - 223K
  • The date you started your fixed-rate mortgage - June 2020
  • How many years you fixed for: 5 years - 3 remaining
  • Your current mortgage interest rate 2.45%
  • Your current monthly repayment (excluding any overpayments) €706.26 - 28 Years Remaining
  • Your property's BER - A2
  • Are you due to get extra cashback from your current lender in the future - No

    Hi Paul, thank you for all the great work your doing!
    I was considering getting a valuation and switching to AIB's 2.15% for the remainder of the fixed period (if that's possible) but after seeing your other replies I think I might be better off changing providers altogether.
 
Paul F said:
€177k implies that there are 29 years left on your mortgage. Are you sure that is the up-to-date balance?

What valuation did AIB give you in 2020?
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Apologies I had looked at an old document, 171k.

Bought at 223K, valuation should bring it to between 250-300K.
 
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@MortgageRateQ Your break fee should be zero at the moment – but confirm it with AIB. If it is higher than zero, please post it here when you receive it, including the date of the letter.
  • Switching immediately to Haven's 4-year green fixed rate (2.0% with €2,000 cashback) will save you about €3,020 over the next 4 years

  • Switching immediately to AIB's 5-year green fixed rate (2.15% with no cashback) will save you about €1,340 over the next 4 years. And it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).
    • And it is quite likely that you will be able to make unlimited overpayments without penalty for the foreseeable future (see this thread)

  • Switching immediately to Avant Money's 7-year fixed rate (2.25% with no cashback) will leave you worse off by about €660 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 (2.4% with no cashback) will leave you worse off by about €1,640 over the next 4 years – but with the longer security of 10 years on a fixed rate
    • This is much better value than KBC's 10-year rate over the next ten years

  • Switching immediately to KBC's 10-year fixed rate (2.85% with €3,000 cashback) will leave you worse off by about €1,600 over the next 4 years – but with the longer security of 10 years on a fixed rate
    • Note that if you decide to do this, your mortgage 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 3.0%
    • So if you switch to this KBC offer now, you will probably 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).
    • You must apply by 15 July 2022 if you wish to switch to KBC. You would also have to apply for a current account with them by that date.
    • The same warnings as above regarding higher Bank of Ireland rates in the future apply

  • Switching immediately to Avant Money's "One Mortgage" (a 2.5% fixed rate with no cashback) will leave you worse off by about €2,300 over the next 4 years – and the interest rate will remain fixed for the remainder of your mortgage term (approximately 28 years)

  • Switching immediately to AIB's 7-year fixed rate (3.05% with no cashback) will leave you worse off by about €4,620 over the next 4 years – but with the longer security of 7 years on a fixed rate. And it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).

  • Switching immediately to Finance Ireland's 10- or 15-year fixed rate (2.9% with no cashback) will leave you worse off by about €4,960 over the next 4 years – but with the 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

  • Switching immediately to AIB's 10-year fixed rate (3.2% with no cashback) will leave you worse off by about €5,620 over the next 4 years – but with the longer security of 10 years on a fixed rate. And it is very simple and quick to do (no bank statements, salary cert or solicitor, etc., needed).

  • Switching immediately to Finance Ireland's 20-year fixed rate (3.0% with no cashback) will leave you worse off by about €5,620 over the next 4 years – but with the longer security of 20 years on a fixed rate
    • This product has a benefit in relation to moving home in the future that is explained below

  • Switching immediately to Finance Ireland's 25-year fixed rate (3.15% with no cashback) will leave you worse off by about €6,620 over the next 4 years – but with the longer security of 25 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 switching to the 2.15% rate with AIB when the current fixed rate ends. And that's assuming that AIB are even offering a 2.15% rate in June 2025 – it could be higher (or lower). 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).

The estimates also assume that you get your loan-to-value ratio (LTV) below 60% so that you are eligible for some of the listed rates. (You are already eligible for the Haven and AIB green rates.) A higher property valuation (€285k) and/or a few more monthly mortgage payments and/or a lump sum overpayment will get you below 60%. But that is not a reason to delay the switch – i.e., you can start the switch immediately.

Bear in mind that interest rates could rise between now and the time that you complete any switch, so if you are thinking of switching you should probably apply simultaneously to two or more lenders for approval in principle (AIP).

Because of a quirk in how AIB calculate break fees, you can switch almost immediately to their 2.15% green rate (you will need an updated valuation), and then start the switch to another lender (if you want to). It is very unlikely that there will be a break fee when leaving AIB, and you can abandon this second switch if interest rates increase a lot safe in the knowledge that you have secured the 2.15% rate. (You may have to pay solicitors' fees if you have got to the point of hiring a solicitor during the second switch.)
 
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Paul F said:
@Frasier Crane Because the break fee quote has been generated, it should be possible for UB to tell you what it is over the phone. See @nephster's post in this thread.
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Spot on. Called them this morning and was told the break fee was €92.11 and valid until today, so I just paid it over the phone and will post the options letter tonight. I think we'll go with the 5 year fixed at 2.35%. Had I gotten my act together a bit earlier, I feel that something like the Avant 7 year fixed at 1.95% would have been a better long term move but it's a bit late for that.
 
  • Current lender - KBC
  • Outstanding mortgage balance (how much you still owe) - 194K
  • Approximate current value of your property - 600K
  • The date you started your fixed-rate mortgage (month and year) - N/A on variable
  • How many years you fixed for - N/A on variable
  • Your current mortgage interest rate - 3.05%
  • Your current monthly repayment (excluding any overpayments) - 2050
  • Your property's BER (Building Energy Rating) - A2
  • 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 (monetary amount) and when? N/A
Thanks in advance @Paul F and all for comments!
 
  • Current lender - AIB
  • Outstanding mortgage balance (how much you still owe) - 287K
  • Approximate current value of your property - 600K+
  • The date you started your fixed-rate mortgage (month and year) - Aug/Sep 2018
  • How many years you fixed for - 7 years
  • Your current mortgage interest rate - 3.5%
  • Your current monthly repayment (excluding any overpayments) - 1410
  • Your property's BER (Building Energy Rating) - 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 (monetary amount) and when? N/A
Thanks in advance!! Much appreciated
 
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