Key Post Mortgage switching in Ireland – break fee calculations and savings estimates

Paul F

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I am creating this thread as a place where people can request guidance on whether they should switch their mortgage (also called mortgage refinancing) and, if so, which lender and rate they should switch to.

You are allowed to switch even if you are in the middle of a fixed rate with your current lender. The savings can be very significant, even if you have to pay fees.

The guidance will include an estimated calculation of the break fee ("early breakage charge" / "breakage cost") if you are currently on a fixed-rate mortgage, and the savings you would make. (If you are currently on a variable-rate mortgage, you do not have to pay a break fee when switching.) I am not aware of an online mortgage break fee calculator for Ireland, but this is arguably the next best thing.

To request guidance, please provide the following information:
  • Current lender
  • Outstanding mortgage balance (how much you still owe)
  • Approximate current value of your property
  • The date you started your fixed-rate mortgage (month and year)
  • How many years you fixed for
  • Your current mortgage interest rate
  • Your current monthly repayment (excluding any overpayments)
  • Your property's BER (Building Energy Rating) – check it here or estimate it if necessary
  • Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much (monetary amount) and when?
If you are looking for information on something that is not directly related to break fees or which lender to switch to, first check the below links to see if your query has been answered before. Consider asking your question in one of those threads before asking it here.

Almost all mortgage lenders in Ireland – AIB, Avant Money, Bank of Ireland, EBS, Finance Ireland, Haven Mortgages, ICS Mortgages, Permanent TSB – accept applications from mortgage switchers. KBC will soon stop accepting applications for switching your mortgage to them from your current lender. But note that both KBC and Ulster Bank still allow their current mortgage customers to switch to a different interest rate, even though they are leaving Ireland.

Interest rates could rise between now and the time that you complete any switch, so you should apply simultaneously to two or more lenders for approval in principle (AIP), or consider re-fixing with your current lender (which is a much quicker process).

Nothing in this thread should be considered financial advice.
 
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Paul F

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Reasons why you may not be able to switch
  • Insufficient time with your current lender
    • Usually you need to have been with your current lender for at least 12 months before a new lender will take you
    • But different lenders have different rules (further info here)
    • In the case of switching to Permanent TSB, it appears that you only need to have been with your current lender for 12 months. (Previously it was 2 years.)
  • You (or your partner, in the case of a joint mortgage) are on probation in a new job
    • But you should still start the switch as soon as possible, since the process takes two or three months
    • You will be able to get approval in principle (AIP) with most lenders even if you are on probation, but you won't be able to complete the switch until your probation is over
  • Your (or your partner's) employment circumstances have changed significantly since you got your mortgage
    • E.g., a large reduction in salary, or one of the couple is looking after the kids and no longer working
    • If you are self-employed, consider Bank of Ireland or Finance Ireland
  • You and your partner have a joint mortgage and have split up and your partner won't agree to a mortgage switch
  • Your loan-to-value ratio (LTV) is over 90%
    • As an example, if your current mortgage balance is €276k and your property is worth €300k, your LTV is 276/300 = 92%
    • Some lenders (Avant Money and Finance Ireland) are stricter than this and will not let you switch to them if your LTV is over 80%
    • If you are in negative equity, your LTV is over 100% (your property is worth less than your mortgage) and you won't be able to switch
  • The break fee is very high
    • The break fee is also called the early redemption charge, break funding cost, break funding fee, break charge, early breakage charge, breakage cost, breakage fee, etc.
    • You may have to pay this charge if you are breaking out of your current fixed-rate mortgage before the fixed-rate period expires, but the charge is often very low or zero
    • Even if the charge seems high, the savings from switching can often be much larger
    • You can use this thread to request a calculation of the early breakage charge and the savings you would make (both estimated)
  • Your mortgage balance is too low
    • Most lenders will only let you switch to them if your mortgage is at least €30k to €40k
    • Avant and ICS will only let you switch to them if your mortgage is at least €100k
    • Note: if a particular broker tells you that your mortgage balance must be, e.g., at least €200k in order to switch, look for another broker. (The broker is imposing more conditions than the lender.)
  • There are only a few years left on your mortgage
    • Most lenders will probably only let you switch to them if there are at least 5 years remaining on your mortgage
  • Your mortgage is in arrears
  • You have a bad credit record
  • There are serious defects in your property (mica, etc.) that have emerged since you first took out your mortgage
    • Some types of defects are not a problem for switching
  • Your employer is on the Employment Wage Subsidy Scheme (EWSS)
  • You do not have enough savings to cover the upfront costs of switching
    • Even though switching usually saves you money over the medium and long term, you need to pay some fees upfront
    • You should be able to find a solicitor who charges €1,300 or less, including VAT and outlays (see below)
    • The valuation fee is €150 or €185. Note that some brokers will pay this fee for you if you are switching to Avant.
    • You can ask for an estimate of your break fee in this thread. It is often lower than people imagine.
  • Your property is older than 100 years
    • This is not a problem on its own but you will need a structural survey
    • If that survey shows certain types of problems, some lenders won't let you switch to them (see this case)
  • You have moved out of the property and are now renting it out
    • This means you would only be able to switch to a buy-to-let mortgage, which will probably have a higher interest rate
Some of the above reasons may not be a major problem for certain lenders. It is often worth talking to them or to a broker to see if you can still switch.

If you are definitely not able to switch to a different lender, you may be able to switch to a better rate with your current lender. Feel free to ask for guidance in this thread (supplying your mortgage information in the format shown in the first post). In the case of some lenders (especially Bank of Ireland), you may even be able to get a better rate than they advertise by threatening to switch.

Note that being on maternity leave does not seem to be a problem for switching.
  • _OkGo_'s comment: "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"
  • Itchy's comment: "Just been through the process. There was no extra requirements other than they requested a letter from the employer to state that they would be returning to their position."
Borrowers are sometimes reluctant to enter into a fixed-rate mortgage if they expect to move house in the next few years. But consider the following:
  • Fixed rates are generally a lot lower than variable rates, so the savings on a fixed rate will offset some or all of the break fee you may have to pay when you move
  • You can fix for a relatively short period, e.g., 2 or 3 years, which will help limit the size of any potential break fee
  • Break fees are often a lot lower than people imagine
  • Some lenders, e.g., Avant Money, will waive or refund any break fee if you move home, provided you take out a new mortgage with them (subject to certain conditions). And Finance Ireland's long-term fixed-rate mortgages allow you to "take your mortgage with you" – meaning that you get to keep the same interest rate and you won't have to pay a break fee if you move home.
  • Therefore, you should still consider switching even if you expect to move house in the next few years, but either avoid a long fixed rate or pick a mortgage that allows you to avoid a break fee when you move
 
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Paul F

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Resources

Brokers who work with Avant Money
  • You can apply for Approval In Principle (AIP) via Avant's website
    • After that you can contact a broker (or you can contact a broker as the first step)
  • List of brokers on Avant's website
  • Confirm with the broker that you will not be charged a fee
    • Here is an old list of some brokers that don't charge a fee, but confirm with them yourself
  • Some Avant brokers will even pay the lender's valuation fee on your behalf
Mortgage rates available
  • The CCPC's comparison tool (the "Switchers" tab). A small number of rates are missing or incorrect. Incomplete info on cashback offers but overall a very useful tool.
  • Note: both Ulster Bank and KBC are leaving the Irish market, possibly by late 2022/early 2023. Their mortgages will be sold to Permanent TSB and Bank of Ireland, respectively. Even though you may be able to switch to Ulster Bank or KBC at the moment (or change rates if you are an existing customer), you should realise that when your fixed rate ends you will probably be put on a PTSB/BOI interest rate, which could be much higher.
    • Therefore, it is probably not a good idea to switch to an Ulster Bank/KBC rate (unless you are confident that you will be able to switch again when your fixed rate with them ends)
    • But it could be a perfectly good idea to switch to an Ulster Bank/KBC rate if there are only a few years remaining on your mortgage
  • Key Post: What happens if fixed rates rise before I have switched?
Mortgage overpayments
  • Some lenders allow you to make large overpayments on your fixed-rate mortgage without penalty – see this thread for details
    • Note that even if a lender does not allow overpayments without penalty, that penalty can sometimes be very small or even zero. You can provide your mortgage details (in the format shown in the first post) in this thread to get an estimate of the penalty.
    • Making an overpayment, no matter how large, will not result in you losing your fixed interest rate, i.e., you do not have to break out of your fixed rate to make an overpayment (but you may have to pay a penalty to make the overpayment)
    • You can always overpay on a variable-rate mortgage by as much as you want without penalty
  • Overpaying my mortgage - should I reduce the term or the monthly repayment?
  • Typical financial priorities and where mortgage overpayments fit in
Mortgage calculators
Low-cost solicitors (these are not necessarily recommendations, just info from other posters)
BER (Building Energy Rating) certs and assessments
  • To switch to a "green mortgage", you must have a BER cert for your property with a rating of B3 or higher
  • The BER cert must be less than 10 years old
    • Some lenders may let you use your old BER cert if it is only slightly out of date
    • If you bought a newly constructed property, you may have a provisional BER cert, which is only valid for 2 years instead of the usual 10 years
  • Check if your property already has a BER cert by entering your MPRN (shown on your electricity bill)
    • Also check with your current lender and solicitor to see if they hold your BER cert
  • If you need a new BER cert (or if you have never had one), shop around for a low-cost BER assessor
  • There is no guarantee that you will get a B3 (or better) rating, so before arranging an assessment consider whether or not you are likely to get the rating you need
    • If you don't, you will arguably have wasted the money
  • Key Post: Green mortgage rates
 
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Paul F

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Difficulties encountered during switching (and solutions)

Maternity leave
  • Being on maternity leave does not seem to be a problem for switching
  • _OkGo_'s comment: "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"
  • Itchy's comment: "Just been through the process. There was no extra requirements other than they requested a letter from the employer to state that they would be returning to their position."
Foreign credit checks
Qualification on title
Other
 
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fungie20

Registered User
Messages
54
Might as well get the ball rolling:

Current lender: Bank of Ireland
Outstanding mortgage balance: 342k
Approximate value of your property: 575k
The date you started your fixed-rate mortgage: December 2019
How many years you fixed for: 5
Your current mortgage interest rate: 2.8%
Your current monthly repayment: 1500 approx
Your property's BER: A3
Are you due to get extra cashback from your current lender in the future: 4300 in December 2024
 

Paul F

Registered User
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741
@fungie20 Your break fee should be zero.

You could consider the strategy outlined in this thread: switch to Haven's 2.35% 3-year fixed rate and get the €5k cashback.
Then quickly switch to Haven's 2.0% green rate.

Nobody knows for sure if Haven will allow you to do this, so you might be stuck on the 2.35% rate, which isn't bad considering the €5k cashback.

There is a similar strategy with EBS (see @Brendan Burgess's third post in this thread), but it is higher risk in the sense that you will be stuck on a 2.9% rate if they don't allow the second switch.

Or you could settle for smaller savings over the short/medium term but a longer fixed rate by going for Avant's 1.95% 7-year rate.

It doesn't seem worth staying with BOI for another several years to get the €4,300 cashback.
 
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Thrifty_Fifty

New Member
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3
Current lender: KBC
Outstanding mortgage balance: 192k
Approximate value of your property: 320k
The date you started your fixed-rate mortgage: 28 June 2019
How many years you fixed for: 5
Your current mortgage interest rate: 2.65%
Your current monthly repayment: €1,018
Your property's BER: N/A
Are you due to get extra cashback from your current lender in the future: No

I rang KBC on 15 Feb and was quoted €101 to break, then they rang me back and said they made a mistake and it was actually €501. I received the letter with the €501 break fee this week but it doesn't show the interest rates used in the calculation. I believe the interbank interest rates have dropped a bit since 15 Feb but does the €501 I was quoted then sound right? Thank you!

Edit: They just told me the original funding cost was -0.09 and the "cost of breakage" is -0.21.
 
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Paul F

Registered User
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@Thrifty_Fifty That break fee does not look correct to me.

I'll assume that the cost of funding (-0.09%) is correct. But based on this graph, the cost of breakage should be around +0.21% (using the 13 Feb datapoint), not the -0.21% that they have quoted you.

If I'm right, the calculation is €192000*(-0.09 - (+0.21))/100*2.3 = -€1,325, i.e., a break fee of zero.

@Brendan Burgess or @_OkGo_ or anyone else who is familiar with break fees, what do you think?
 

_OkGo_

Registered User
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328
If I'm right, the calculation is €192000*(-0.09 - (+0.21))/100*2.3 = -€1,325, i.e., a break fee of zero.

@Brendan Burgess or @_OkGo_ or anyone else who is familiar with break fees, what do you think
Sorry @Paul F , my knowledge of interbank rates (and where to find them) is lacking so I'm not much help.

But your calculations look correct and it would appear to be a typo by KBC using the wrong sign on the 0.21%
 

Thrifty_Fifty

New Member
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Many thanks for the help. I was surprised there was a break fee as I thought interbank rates might be higher now than when I fixed at the end of June 2019.

I suppose my next step is to ring and ask if it's possible they used the wrong sign in the calculation....
 

Paul F

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I suppose my next step is to ring and ask if it's possible they used the wrong sign in the calculation....
I think it's very unlikely that they would understand what you are talking about. It's probably best if you just ask them for a new break fee quote and hope that they do it right this time. (I'm assuming in all this that they made a mistake. I suppose it's possible that they didn't, but then again they gave you a wrong amount (€101) initially.)

As an aside, it sounds like they have a very manual process for calculating break fees, which is pretty shocking if true.

If your break fee comes back as zero or very small, you might want to consider breaking and switching to:
  • KBC's variable rate (3.0%), or
  • KBC's 2-year fixed rate (2.25%)
  • KBC's 2-year fixed rate (2.3%) if they tell you that you need an updated valuation to get the 2.25% rate
This switch is only a temporary measure if you want to "lock in" a low break fee. If the 2-year interbank rate continues to drop and gets below -0.09%, there will be a break fee. But maybe it will rise and there will continue to be no break fee – who knows.

Of course, switching to the 3.0% variable rate comes with a cost – an extra €56 per month in interest. The 2-year fixed rates would save you a similar amount in interest but would only delay any break fee if interbank rates continue to fall.

Anyway, all of that is just a stepping stone to leaving KBC. Your best bet is probably to switch to Avant's 1.95% rate, fixed for up to 7 years. And if you start the switch before the end of March, you'll get €1,500 cashback (provided you use a broker who is an Avant "Gold Partner").
 
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Gordon Gekko

Registered User
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6,120
Hi Paul F,

This is a really useful thread, thank you.

- Ulster Bank
- €650,000
- €1.75m
- December 2017
- 5 years 3 months
- 2.5%
- €2,850
- C3
- No cashback due

Many thanks,

Gordon
 

fungie20

Registered User
Messages
54
@fungie20 Your break fee should be zero.

Or you could settle for smaller savings over the short/medium term but a longer fixed rate by going for Avant's 1.95% 7-year rate.

It doesn't seem worth staying with BOI for another several years to get the €4,300 cashback.

I'm thinking of switching to Avant alright. I should be able to get lowest rate on offer and fixed for a good period of time.
 

ReadyBrek

Registered User
Messages
5
Great thread, thanks in advance.

  • Current lender: BOI
  • Outstanding mortgage balance (how much you still owe): €210k
  • Approximate value of your property: €420k
  • The date you started your fixed-rate mortgage (month and year): April 2021
  • How many years you fixed for: 1
  • Your current mortgage interest rate: 2.9%
  • Your current monthly repayment (excluding any overpayments): €1,617
  • Your property's BER (Building Energy Rating) – estimated if necessary: A2
  • Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when?: No
House was a self-build
 
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Paul F

Registered User
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741
- Ulster Bank
- €650,000
- €1.75m
- December 2017
- 5 years 3 months
- 2.5%
- €2,850
- C3
- No cashback due
Your break fee will be approximately €3,800, but confirm it with Ulster Bank.

Switching to Avant's 1.95% rate fixed for up to 7 years will save you about €7,700 over the next five years (versus switching immediately to Ulster Bank's 2.2.% 5-year fixed rate), and that's after accounting for fees and cashback. Of course, if you decide to stay with UB and switch to their 2.2% rate, you will probably have to switch again in a few years, at which point interest rates might be higher.

The above assumes that you start the switch to Avant before the end of March and use a broker who is an Avant "Gold Partner", so that you are eligible for the €1,500 cashback.

Your break fee (€3,800) and the amount of extra interest you would pay by staying on the 2.5% rate (€3,575, versus switching to Avant) are similar, so there is probably little point in delaying the switch.
 
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Paul F

Registered User
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741
  • Current lender: BOI
  • Outstanding mortgage balance (how much you still owe): €210k
  • Approximate value of your property: €420k
  • The date you started your fixed-rate mortgage (month and year): April 2021
  • How many years you fixed for: 1
  • Your current mortgage interest rate: 2.9%
  • Your current monthly repayment (excluding any overpayments): €1,617
  • Your property's BER (Building Energy Rating) – estimated if necessary: A2
  • Are you due to get extra cashback from your current lender in the future, e.g., "1% after 5 years", or "2% cashback monthly"? If so, how much and when?: No
Your break fee should be zero, but confirm it with Bank of Ireland.

You could switch to Haven's 2.0% green rate, fixed for 4 years. You will get €2,000 cashback. You will be better off by about €7,300 in four years' time (versus staying on a 2.9% rate with BOI), and that's after accounting for fees and cashback.

Or if you're feeling brave, you could try the strategy outlined in this thread: switch to EBS's 2.9% 1-year fixed rate and get the €4,200 cashback. Then immediately switch to their 2.1% green rate, fixed for four years. You would save an extra €1,500 over the next four years (versus going the Haven route). But nobody knows for sure if EBS will let you make the second switch. If they don't, you'll be stuck on a high (2.9%) rate.

If you're prepared to settle for smaller savings in exchange for a longer fixed rate, switching to Avant't 1.95% rate lets you fix for up to 7 years. You will be better off by about €5,700 in four years' time (versus staying on a 2.9% rate with BOI), and that's after accounting for fees.
 

Paul F

Registered User
Messages
741
I'm thinking of switching to Avant alright. I should be able to get lowest rate on offer and fixed for a good period of time.
The Haven strategy outlined in the other thread (if it works) would save you an extra €4,300 over the next four years (versus switching to Avant). But Avant lets you fix for up to 7 years, so it's a question of extra savings versus longer security.
 

fungie20

Registered User
Messages
54
The Haven strategy outlined in the other thread (if it works) would save you an extra €4,300 over the next four years (versus switching to Avant). But Avant lets you fix for up to 7 years, so it's a question of extra savings versus longer security.
The haven approach is unconfirmed so won't be doing that.
 
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