Cashback vs. Lower interest rate

J

Jack Black

Registered User
Messages
2
Hi All

Currently looking at switching options and trying to figure out the best approach. We are both in our early 40s and have 27 years remaining on the term so as part of any change we will be looking to knock 4 years off the term.

Current situation:
- 2 years into a 29yr mortgage, 406k outstanding
- Current value of property ~600k
- 3 yr fixed with BOI @ 3.45%, monthly repayments of 1950
- Got 2% cashback from BOI on drawdown of mortgage (8k), with another 1% due in 2022


Have spoken to BOI:
- They offered a new rate of 2.8%, reducing the term to 23 yrs = 1995/month
- Breakage fee of 306 euro whether we take the new rate or switch lender

Spoke to EBS:
- They have offered a rate of 3% (3yr fixed) over 23 years = 2040/month
- Cashback of 8k, with a further 4k to come

Over 3 years the 8k cashback from EBS outweighs slightly lower repayments with BOI + switching fees of around 3100. ( Additional 50/month * 36 months = 1800 +
Breakage fee = 300 +
Fees = 1000)

Any thoughts on whether I'm being over simplistic here? It seems clear to me that the EBS offer is the one to go with.

Thanks
Jack
 
Don't look at repayments. Look at the interest and the costs.

The break fee applies whatever you do, so ignore it.

Bank of Ireland will charge you €400k @ 2.8%

EBS will charge you and additional 0.2% - so the cost over 5 years will be 1% or €4,000
The legal fees will cost you about €1,000
So total extra costs to EBS is €5,000

You will get 3% cash back or €12,000

So you are better off by €7,000

Brendan
 
Might be worth considering switching multiple times to avail of PTSB's cashback also and then end up in Ulster or KBC with a low fixed rate. Also I'd keep the term as long as possible and overpay to the equivalent amount of the shorter term you want, means a lower minimum mortgage payment if you ever encounter any difficulty (job loss etc).
 
Yes i agree with Coldwarrior, you should consider the multiple switch, first to PTSB for their 2% cash back offer as they require you to be with current lender 24 months, then to EBS for their 2% cash back and then Ulster Bank for the best rate. Look up my posts regarding multiple switches for more details
 
You must log in or register to reply here.
Back
Top