Best switching option for me?

I'm not sure can I ask questions in this thread, so do move it if not.


I currently have a mortgage left of about €183,000 to finish in 2034. As I'll be well over retirement age then, I've been overpaying it and it's actually due to finish in 2029; I'm looking to overpay an additional amount to reduce the term further. The current rate is 3.7% with EBS, variable.

So I'm looking at this going for a fixed rate with great interest, but little knowledge. My simple arithmatic is:
183,000 @ 3.7% = 6771 current variable rate (EBS)

183,000 @ 3.5% = 6300, saves me €471 (EBS fixed rate)

183,000 @ 2.9% = 5307, saves me €1,464 (KBC 1 yr fixed) + €3000 cashback

183,000 @ 3.35% = 6130.5, saves me €640.5 (BoI 1 year fixed) + €3660 cashback

183,000 @ 2.53% = 4629.9 saves me €2,141.1 (BoI 3 yr fixed) + €3660 cashback


Am I on the right track? Would it really be that worthwhile to switch? The idea is that I'd save my extra payments of about 500 pm in an investment account somewhere to add to the mortgage when I go back to variable, assuming the market will be better for variable in 3 years time.

The other question of course is, would I be an acceptable switcher, seeing I actually retire in 2023. My lump sum should pay off any outstanding balance then, I hope.

I'd be grateful for advice, opinions, and corrections to my calculations.

What age are you now, and do you have a defined benefit pension? This might be biggest factor in whether another bank would accept you.

I'm 59, and work part time in the public sector. Is that defined benefits? I entered it years ago, so still have the 65 retirement age.

Thanks!

Unfortunately age counts against you for switching, but it might be possible depending on you pension. I've assumed you are the only person on the mortgage.

As I understand it, KBC have a strict upper limit of 68. UB and BOI are 70. However, if you mortgage goes beyond your normal retirement age (65 in your case), you'd need to demonstrate that you can service mortgage from pension or other means for the term. I'm not aware of a lender allowing a lump sum in underwriting for new business, but they might allow in a restructure for existing customers.

What that means in practice. In your case you'd need to repay 183k over max 11 years to bring you to 70. At 3% that's 1,620 per month, and you'd need to have at least 1,500 left for living expenses to satisfy the bank. If your pension is going to leave you with over 3k per month after tax, it might be worth a phone call to UB or BOI to explore if it's possible.

If you can't switch: Unfortunately EBS rates aren't competitive, but I'd still fix for 1 year in your circumstances, and review in 12 months.

Because you want to overpay, you might consider splitting the mortgage. Leave say 10% at variable rate, and any overpayment will go against that portion.

I would be very surprised if you another lender would take you. The BoI three year would be the best deal if they are prepared to take you on.


Assuming that they wouldn't...

Gordanus said:

183,000 @ 3.7% = 6771 current variable rate (EBS)

183,000 @ 3.5% = 6300, saves me €471 (EBS fixed rate)

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I don't think it's worth fixing.

I would expect that rates generally will fall and you want to be able to avail of that without penalty. While penalties for breaking out of a fixed rate are expected to be small, fixing for a saving of 0.2% does not seem to be worth it.

Brendan

RedOnion said:

I've assumed you are the only person on the mortgage.

Click to expand...

I am.

RedOnion said:

As I understand it, KBC have a strict upper limit of 68. UB and BOI are 70. However, if you mortgage goes beyond your normal retirement age (65 in your case), you'd need to demonstrate that you can service mortgage from pension or other means for the term.

Click to expand...

I'm self-employed also, which was why they gave me such a long mortgage in the first place, but my income will drop as I really don't want to carry on working the same hours as I do now.

RedOnion said:

I'm not aware of a lender allowing a lump sum in underwriting for new business, but they might allow in a restructure for existing customers.

What that means in practice. In your case you'd need to repay 183k over max 11 years to bring you to 70. At 3% that's 1,620 per month, and you'd need to have at least 1,500 left for living expenses to satisfy the bank. If your pension is going to leave you with over 3k per month after tax, it might be worth a phone call to UB or BOI to explore if it's possible.

Click to expand...

Yeah, I'm already paying 1,960pm and want to up that by another 200. But the Jeacle calculator is giving me different outcomes to what the EBS did, I'll have to chat with them again.

RedOnion said:

If you can't switch: Unfortunately EBS rates aren't competitive, but I'd still fix for 1 year in your circumstances, and review in 12 months.
Because you want to overpay, you might consider splitting the mortgage. Leave say 10% at variable rate, and any overpayment will go against that portion.

Click to expand...

That's a good idea, thanks. I'll go talk with them.

Ah yes, if you're self employed also AIB and EBS would look at extending the term.

Re calculations, have a look at DrCalculator.com which I've found to be very accurate and flexible for playing around with scenarios.

I note @Brendan Burgess comment above about not being worth fixing. There's something off with your maths in OP so the saving is less than I thought (I didn't do the maths earlier). Annual interest saving is 366.

I'm less optimistic than Brendan on seeing a general fall in variable rates in the short term.

Thank you very much!