UB mortgage - is switching to Avant the best idea? Possible 3k fees

I posted my query months ago, when UB announced their departure, I received advice, I have done nothing.

I still can't face possible 3k fees to switch mortgages.

Here are the details:

UB mortgage, original 200k, 24yr term
Original LTV = 50%
Date you fixed: Dec-2018, start of mortgage
Period for which you fixed: 4 years and 4 months
Fixed rate: 2.60%
Fixed until 31.03.2023


Letters rec'd from UB, Jan 2021, in response to my query about breakage fees.
Break fee = 1,944.28, valid until 14.01.2021.
Rate sheet: 2yr fixed 2.2% until 31.03.2023 is 39 less pm for same term, so a saving of 26 months * 39 = 1,014

Amount of mortgage balance outstanding: €130k approx, Nov 2021, as I have made three 10% lump-sum annual overpayments
Current LTV = under 30%
Current LTI is less than 2x gross income
In three years of a 24 yr mortgage I have reduced the balance by 35%


I suppose the best idea is to switch to Avant at 1.95% fixed over 5 or 7 years?

Break fee = was nearly 2,000 back in Jan 2021
Sol fee =? I suspect I could get it done for 1,000, outside Dublin

That 3,000 fee is a lot to offset....................

Should I move now, pay the break fee, or wait until April 2023?

Worth getting an updated break fee quote. Up until last week I would have expected the fee to have declined. Not sure how last week's volatility effected interbank rates.

You've 16 months left on your fixed rate. If you were to switch to Avant (1.95%) you would save about €1,160 in terms of interest. That's your benchmark. If your break fee is higher stay put. If it's lower it will pay in the short term to switch.

I've ignored the legal fees as an Ulster Bank customer you'll likely want to move lenders at some stage.

Hi Protocol

Forget repayments. Just look at the interest charge. That is the real cost of your mortgage.

Mortgage €130k
Interest rate: 2.6%
Best rate available: 1.95% (Avant)
Annual saving: 0.75%
Saving in first year: €975

Saving to March 2023: c. €1,300

I would guess that the break fee is now a lot less than this.

At the rate you are overpaying your mortgage, you probably don't want to fix the rate for very long.

You could break out and refix with Ulster for 5 years at 2.35%.

That might be the simplest.

Brendan

Assuming you can match your previous repayments going forward (I'm now assuming your average payment is €2360 a month) you'd save close to €1,400 by switching over the remainder of the mortgage (just under 5 years the way you're going) vs remortgaging at the current 5 year rate. With legal fees it's very close either way. It comes down to your solicitors fee and your financial outlook.

Do you qualify for a lower rate mortgage offered by AIB who will contribute 2k to your switching costs? That could make a switch worthwhile.

Thanks.

I never thought of breaking out of the current fixed rate, and then re-fixing with UB.

Break out of 2.6% fixed, re-fix at 2.35% for five years until Dec 2026.

No need for sol or all the usually legal switching hassles, etc.

skrooge said:

Assuming you can match your previous repayments going forward (I'm now assuming your average payment is €2360 a month) you'd save close to €1,400 by switching over the remainder of the mortgage (just under 5 years the way you're going) vs remortgaging at the current 5 year rate. With legal fees it's very close either way. It comes down to your solicitors fee and your financial outlook.

Click to expand...

My repayment pm is 839.

Protocol said:

My repayment pm is 839.

Click to expand...

The €2360 was the equivalent repayment required to get you from 200k-130k over the last couple of years i.e.., if you had spread out your overpayments evenly each month (it's an approximation of what you might be able to pay monthly. Assuming you can do the same again over the next 5 years it's the more relevant figure when trying to estimate your interest expense.

I requested an updated break-fee last week.

Current fixed rate is 2.6% until 31.03.2023, so fixed for another 15 months.

The letter arrived just now, 894 fee.

Break fee valid until 20.12.2021, a week away.

On the phone they said that they would send a rate options form, but no sign of it.

The balance is 129,654, with a current effective term remaining of 15y9m, and current repayment is 839.

If I break from 2.6% and switch to 2.35% fixed for five years, I will save 0.25% interest.

(0.25%)(129,654) = 324 euro interest saving in first year versus 894 fee.



Advantages of staying with UB:

2.35% is a good rate, although not as low as Avant 1.95%
I will have five years insurance against rising rates.
I have the ability to make 10% lump-sum overpayments
I avoid possible PTSB higher rates
No hassle of switching lender
No legal fees


I have nearly convinced myself to stay with UB, not switch to Avant, but to pay break fee and move to 2.35% fixed for 5 years.

This has got me thinking.

I am trying to weigh up staying with UB versus switching to Avant

Using Karls mortgage calculator, if I go for a 12 year term, there is a 3,400 interest saving with Avant.

That seems to be worthwhile for the hassle of switching lender.

I have got online AIP from Avant today.

@Protocol Bear in mind a couple of points:

• All other things being equal, i.e., interbank interest rates not moving, your break fee will fall by about €58 per month
• If you break and re-fix with Ulster Bank, you will probably have to switch lenders in 5 years' time (unless you have made such large overpayments in the meantime that it is not worth your while)

So if you think you will want to switch in 5 years' time, why not bite the bullet and do it in January when Avant are offering the sweetener? (You'll also be on the lower rate.)

Thanks.

I have now decided to switch to Avant. I want to get the 1,500 contribution towards legal costs.

I have applied to Avant online, and got AIP.

Avant suggested three brokers, at the end of the online application.

I presume I can use any broker?

My query is about the timelines.

When should I pay the break-fee to UB? Now, or wait until I have made a full application to Avant?

I normally make a lump-sum overpayment to UB in Jan, and I would like to do so, in two weeks time.

I'm thinking it's okay to do that, while I make the application to Avant.

Is there anything else that I'm missing?

1) You are on 2.6%
If you break now, you will pay about 3.4%

0.8% @130k /12 = €100 per month

It could take a few months to get the paperwork done. So say €300.

2) Remaining term : 15 months.
This could be down to 12 months.
All else being equal, the break fee with 12 months remaining should be lower than the break fee with 15 months remaining.

3) The underlying calculation based on money market rates could go either way.
I think that rates would have to fall a fair bit in 3 months to overcome 1) and 2) combined

So, leave it until the last minute.

Brendan