KBC re-fix and BOI questions

Hi all,

I'll try to make it short but still I need to give some context. My situation:

Current lender: KBC
Outstanding mortgage balance (how much you still owe): €282,000
Approximate value of your property: €525,000
The date you started your fixed-rate mortgage (month and year): October 2019
How many years you fixed for: 5 years
Your current mortgage interest rate: 2.65%
Your current monthly repayment (excluding any overpayments): €1549

I asked KBC about the breaking fee and they said it was €0, they have sent me the paperwork to sign so I did, today, and sent back to them.

They told me they have a huge volume of calls and mortgage movements at the minute so it might take up to 7-10 working days for the break to be activated.

Now, the steps to take in my mind are as follows:

1.- This breaking will get my mortgage to fall into variable rate.
2.- At this point being able to do whatever I want, I will pay a lump sum to the mortgage balance of €60,000 to bring the balance down to €222,000, without incurring in any penalty.
3.- Finally, I will ask KBC to re-fix my mortgage to a new 5 year fixed rate at 2.40% (as after paying the lump sum, the LTV will go below 60%).

What is coming to my paranoid mind now are two paranoid questions:

a) could KBC, after breaking the fixed rate and me being in variable rate (hence, trying to enter step 3 of my plan), say "we cannot give you a fixed rate now because of whatever excuse/reason?" Granted, my situation is the same as when I signed back in 2019, we both have our jobs, same salaries, the house even raised its value since 2019, so would they have any reason to say "we cannot give you a fixed rate now, stay in variable and good luck"?

b) on the step 3 of the plan, since I am effectively signing a new mortgage with KBC let's say at some point in July 2022, could BOI say "this mortgage has been signed AFTER the deal agreed between BOI and KBC so BOI doesn't have to honour it, you will fall into one of our expensive variable rates, good luck"?

Thanks,
Marc

Hi Marc

KBC will not try to pull a fast one on you.

Just pay the lump-sum off immediately.

Then fix for 5 years.

BoI must honour that agreement.

The only, very slight, risk, is that KBC will raise fix rates before you organise all this.
So do it immediately. No need to wait for the break to go through.

Brendan

Hi Brendan,

Thanks for your reply.

Do you mean to pay the lump sum without waiting for the break confirmation from KBC? Wouldn't that make me incur in a penalty? Note that €60,000 is pretty much double of the 10% limit KBC allows me on the fixed-rate mortgage I currently have.

M.

marctobin said:

I asked KBC about the breaking fee and they said it was €0, they have sent me the paperwork to sign so I did, today, and sent back to them.

Click to expand...

I am a bit confused.

Did the paperwork not tell you that the break fee is 0 and that it would be valid for 30 days?

If so, then just pay the money off and fix again for 5 years.

I wouldn't hang around just in case they raise their fixed rates.

Brendan

Sorry, maybe that was a bit confusing, the paperwork basically says "the breaking fee will be €0 if you want to break it. This offer is valid for 10 working days from the post date. Should you wish to execute the breaking, please return this signed document and we will acknowledge your decision to break it" so I did sign it today and send it by email, but they say the "acknowledgment" will happen in 7 to 10 working days.

M.

My guess is you have about 19 years left.

In 5 years time you will be subject to BOI rates, though also will be probably be able to move. But maybe look at the 10 year fixed with KBC. It will be about €50 extra a month compared to the 5 year rate (based on the 222k balance)

No-one knows where rates will be in 5 years, but the ECB target is for rates to be a steady 1.75%-2%, thus a probably 4%-4.5% rate range for the banks at the better end of things and 5%+ for the likes of BOI.

just to say if you wish to change to new ltv rate you will need a valuation by an agent approved by the bank also

You have broken out.
So you can pay off the lump sum now.
And you should fix again immediately for your chosen term.

Brendan

thanks everyone for your replies.

I have phoned KBC today about it and they say, even if I have sent the document signed by email, it needs to be processed, and until then, I cannot pay the lump sum since right now the mortgage is still in a fixed-rate, and it might take 5-7 working days.

I'll get back to this post when the whole process ends and let you know how it went, thank you everyone.

They're saying the break fee is zero but you can't pay the lump sum against the mortgage as it's on a fixed rate still.

This seems inaccurate at best.

Like Brendan says, pay the lump sum. The break fee is zero. So it's immaterial whether you are on fixed or variable. There is no break fee either way.

I called KBC today and a different person than the other day let me know that the process to break the fixed-rate is not done yet but he also confirmed what you guys say, I don't have to wait for the mortgage to become variable in order to make the lump sum (however this is not what the other KBC agent from last week told me).

Happy days, at least I can save some time now.