SHOULD WE SWITCH OUR MORTGAGE ?
Q. Being fortunate enough to have secured our mortgage 16 years ago, our original loan is now down to € 135,000 – c. 40% of the value of the home. We only have 9 years to go and while our mortgage interest rate is 4.5%, is it really worth our while switching ? It currently costs us € 1,522.44 per month. We are both aged 46 with three children under 10 years of age. Thanks for the advice Mary – Drimnagh, Dublin 12
A. Yes Mary it would very much be to your advantage to switch. Recent Central Bank of Ireland research discovered one in five homeowners could save by switching. Apart from some of the enticing incentives ( e.g. 2% of the mortgage back in cash, € 1500 offset against your legal fees for switching, free buildings insurance for the first year ) the reduced rate alone is worth your consideration. You would be entitled to the LOWEST tiered interest rate ( the less you borrow the lower the rate ) plus if with one lender you opted to open a current account with them, a further 0.2% would be taken off your rate FOR THE ENTIRE TERM OF THE LOAN. Let me put it to you in as they say, pounds shillings and pence. A € 135,000 loan over 9 years at 3.25% ( including that 0.2% reduction ) would cost you € 1,443.39 per month. That is € 79.05 cheaper each month than your current repayment and over the 9 years, you actually will be saving a whopping € 8,537.40 ! However if you decided, as it is the cheapest form of money you can borrow, to switch and take out a new 20 year term – you would be mortgage-free two years before your State Pension kicks in at age 68, the monthly repayments would be down to € 765.71. Income wise you would need less than € 40,000 income between you to justify this loan. Take my advice – go for one of those options and save yourself money.