Haven cashback and switching- Opinions

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MsCutha

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Hi all, had a conversation with a friend today about my mortgage options and would like to hear everyone’s thoughts.
I’m with UB fixed until Sept 2023 (LTV 65% with approx €262K balance) and just found out that Haven are given switchers €5000 on mortgages over €250K (excluding green mortgage) with LTV <=70% until Dec 2022. I was quoted 2.6K break fee last month by UB.
As the Haven offer is open until the end of the year, my plan is to wait for my break fee to reduce and then switch to Haven around Sept/Oct.
Friend suggested instead of doing that, I can switch to PTSB variable rate, get the cashback being offered and within 3-4 months switch to a different lender (as I will be on a variable rate so will not be tied down). I’ve never switched before, is this still a thing, what would you make of the suggestion and what are the potential pitfalls? I’m quite risk averse, currently on maternity leave (back in the summer). Any wise words will be appreciated.
 
You don't say what rate you're on.
People get too distracted by cashback offers to the detriment of looking at the rate.
That's what lenders like.
 
Apologies @ClubMan, I’m currently on 2.9% and would be looking to move to either haven’s 2.3% (cashback) or 2.0% green (no cashback). PTSB variable rate is 3.3% but friends suggested I only stay on for a few months after the switch.
 
@MsCutha Haven will give you €2,000 cashback if you go for their green rate (2.0%, fixed for 4 years). It looks like a good choice.

An alternative (which has the benefit of letting you fix for up to 7 years) is Avant's 2.05% rate. Avant will give you €1,500 cashback if you start the switch before the end of March (provided you use a broker who is an Avant "Gold Partner").

I do not recommend switching to PTSB to get the cashback and trying to switch again. Firstly, most lenders won't let you switch to them unless you have been with your current lender for at least a year. Secondly, it's quite possible that interest rates will rise in the next year, and so Haven's 2.0% might not be available when you go looking to switch to them.

When did you fix with Ulster Bank (month and year)? And for how long?

It's possible that your break fee has fallen a fair bit in the last month.
 
@Paul F thanks for your response, I knew there had to be a catch. I fixed with Ulster bank around July 2018 for 5 years due to end Sep 2023.
I didn’t realize Haven gave cashback on their green rate, that is good to know. Is it a new requirement to be at least a year with your current lender before switching? I have never switched before so don’t know how it works.
 
@MsCutha It looks like your break fee is now only about €520. Call UB again and ask them to post you out an updated quote. If it is very different from €520, it is possible that they have made a mistake.

Some posters here have said that not all lenders enforce the requirement that you must be with your current lender at least 12 months before you can switch to them. But I don't have any details.

If you were inclined to, you could do what Brendan sketches out in this post, namely:
  • Switch to EBS's 1-year fixed rate (2.9%) now and get the 2% cashback (€5,240)
  • Then, as soon as you get the cashback, switch to their 2.1% green rate, fixed for four years
A similar strategy would appear to work with Haven (switching first to their 3-year 2.35% rate and getting €5k cashback, and then switching to their 2.0% green rate).

But nobody knows for sure if EBS and Haven will let you do this, even though here doesn't appear to be anything in their T&Cs to prevent you from doing so.

Of the two, the Haven strategy is arguably lower risk because if they don't allow you to make the second switch (to the green rate), you will be on a 2.35% rate, which isn't bad (compared to the EBS 2.9% rate).
 
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That will be amazing if it is the case. I will call them on Monday. If you don’t mind me asking, how does it work with regards to the break fees? How can it be so high last month and possibly so low this month? I will read through @Brendan Burgess post and will take your advice on board. Will update the break fee when I get in touch with Ulsterbank. Thanks @Paul F.
 
MsCutha said:
If you don’t mind me asking, how does it work with regards to the break fees? How can it be so high last month and possibly so low this month?
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The break fee depends on:
  • Your outstanding balance
  • How long is left on the fixed-rate period
  • The change in interbank interest rates from when you fixed to now
As interbank interest rates rise, the break fee falls (all other things being equal) – and interbank interest rates having been rising quite a lot lately.
 
@Paul F thank you so much for responses. This is going to be slightly convoluted but bear with me as I’m trying to make sure I cover all potential issues.
I was thinking that if indeed UB return with a break fee under 1k, I will pay it to break.

I’ve also realised switching may not be as easy taking into account my current circumstance.
I am the main earner and currently at end of the unpaid part of my maternity leave and will be back on payroll (holiday pay) from mid March (around 11th) so will get 3/4th of my wages for March. I’ll be taking the 7 weeks Parents Leave from the end of April until mid June and my employer pays the full wage.

I probably will be unable to start a switch for example next week as I’ve been unpaid since mid Nov (16 weeks unpaid). So need payslips for a minimum of 3 months, my plan B will be to break out of my current fixed rate to UB variable rate (3.7%). That will add approx €250 interest. Do you think this is a good move? Moving to UB SVR means I don’t need to show payslips and I can avail of the affordable break fee. I notice when I receive the break fee letter from UB, the offer lapses in just about a week, hence me trying to make sure plans. Thanks again.
 
MsCutha said:
@Paul F thank you so much for responses. This is going to be slightly convoluted but bear with me as I’m trying to make sure I cover all potential issues.
I was thinking that if indeed UB return with a break fee under 1k, I will pay it to break.

I’ve also realised switching may not be as easy taking into account my current circumstance.
I am the main earner and currently at end of the unpaid part of my maternity leave and will be back on payroll (holiday pay) from mid March (around 11th) so will get 3/4th of my wages for March. I’ll be taking the 7 weeks Parents Leave from the end of April until mid June and my employer pays the full wage.

I probably will be unable to start a switch for example next week as I’ve been unpaid since mid Nov (16 weeks unpaid). So need payslips for a minimum of 3 months, my plan B will be to break out of my current fixed rate to UB variable rate (3.7%). That will add approx €250 interest. Do you think this is a good move? Moving to UB SVR means I don’t need to show payslips and I can avail of the affordable break fee. I notice when I receive the break fee letter from UB, the offer lapses in just about a week, hence me trying to make sure plans. Thanks again.
Click to expand...
why move to a high variable rate?
You could break and refix on 2.2% for 5 years with UB’s high value rate.

no paperwork, and probably as good as Haven’s cash back offer.
 
@newirishman that’s a good point, but I’m thinking if I can get away from having Ptsb as my lender in the future, I may do it now and it will be for a maximum of 3 months I think. Your suggestion is definitely something to consider, it may actually be the more sensible thing to do.
Ps: Mistake in my previous post, I am the higher earner not the main earner.
 
MsCutha said:
@newirishman that’s a good point, but I’m thinking if I can get away from having Ptsb as my lender in the future, I may do it now and it will be for a maximum of 3 months I think. Your suggestion is definitely something to consider, it may actually be the more sensible thing to do.
Ps: Mistake in my previous post, I am the higher earner not the main earner.
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It makes no sense to pay a break fee to move to a higher interest rate. There is no need whatsoever to break your fixed rate until you are moving your money to a new contract.
If you don’t like PTSB as your lender, move to a different bank in 5 years and enjoy low rates until then.
Especially given your current circumstances.
 
Good points. It does look like the sensible option. I guess it will depend on what break fee UB give me. Thank you so much.
 
@MsCutha Personally, I would not want PTSB as my lender no matter how much cashback I got. If your circumstances change, e.g., if one of you is unable to work or goes part time, you could easily be stuck on their high rates.

I would suggest that you start talking to both EBS and Haven (Haven being my preference) now and see what their attitude is to your income/employment situation. If it's looking like they will make you wait a few months (or if they refuse you), then fix with UB at 2.2% for 5 years.

What is your current monthly repayment?
 
@Paul F current repayments are €1131. We stopped overpayments (€1500 including overpayment) when I started my 16 weeks unpaid leave. But that is due to end in two weeks.
My plan was to reduce the term to 25 years (currently under 30). The term reduction will cost bring our monthly payment to €1160 and we can overpay if possible. Or do you think I should leave the term as it is and overpay as normal?
Don’t want to have to worry about interest rates for the next 3-4 years as my older kids (ages 6 and 9) are starting to become money pits.
 
MsCutha said:
My plan was to reduce the term to 25 years (currently under 30). The term reduction will cost bring our monthly payment to €1160 and we can overpay if possible. Or do you think I should leave the term as it is and overpay as normal?
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The general advice here is to leave the mortgage term unchanged (28/29 years), so that what you are contractually obliged to pay each month drops (when you switch to a lower rate), but to continue making regular overpayments if you can.

But EBS and Haven don't allow you to make overpayments (as far as I know) without you having to pay a break fee. That said, there are circumstances (steady or rising interbank interest rates) where the break fee can be very small or zero.

So if you are comfortable that increasing the monthly repayment to €1160 isn't going to put you under financial strain, it might make sense to shorten the term to 25 years (which will save you interest over the long term).

If you switch to Haven and get the cashback, and then succeed in switching to their 2.0% green rate, your monthly payment will come down again (or you could shorten the term further).
 
MsCutha said:
I probably will be unable to start a switch for example next week as I’ve been unpaid since mid Nov (16 weeks unpaid). So need payslips for a minimum of 3 months,
Click to expand...
There is no need to delay. Switching while on maternity leave is common and the lender will just look for an additional letter from your employer confirming your return date and that there is no change to your position or salary. And as far as I am aware, you need to use a broker to switch to Haven so it is a very easy phone call to a broker to ask if your mat leave is a problem before progressing with an application

The payslip requirement is usually "3 most recent payslips" which in your case is just before your unpaid leave

We switched last year (to AIB) while my spouse was on maternity leave and about to take the unpaid part of the leave. Our LTV and LTI were good so that helped but the only other additional work was the letter from the employer confirming return to work. Our savings easily covered the unpaid maternity leave so we could demonstrate that it was a planned expenditure so no problems or questions asked after that.

If your overall finances are in good shape, then you shouldn't have any problem switching now. On the other hand, if you took out a big credit union loan to cover unpaid leave then I wouldn't be applying
 
@Paul F thank you so much for all the info. I didn’t know EBS and haven do not allow overpayment, with that in mind I’ll probably go with €1160 and save what we we are going to overpay by.
@_OkGo_ thanks for your post. Our savings covered the 16 weeks so no loans taken to fund it. I will get in touch with payroll as my company take ages to give confirmation letters. I lost a place on a course due to the time it took for them to sort out my letter. LTV is currently 65%. I have contacted Ulster bank and should have the letter in 5 working days.
 
@MsCutha Remember that, even when a lender doesn't offer a penalty-free overpayment option, there are circumstances (steady or rising interbank interest rates) where the break fee can be very small or zero.

In such cases, overpaying your 2.35% mortgage is like having an investment with zero risk that returns 2.35% per annum tax free.

But an even better use of your money is often topping up your pension (because of the big tax relief you get).
 
@Paul F i got the letter this morning. Break fee is approx €1888.
 

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