Hi Pinchy
This is a very complex calculation. Here is my first stab at it.
The first principle is that you should look at the first 5 years only. What happens after that is irrelevant as you are free to switch to the cheapest lender which is unlikely to be Bank of Ireland.
The second principle is that you should look only at the interest cost and not the repayments.
Do you qualify for the BoI 2% cash back. I assume you don't.
Option 1 - Keep current house
These are rough figures. You will actually pay less than €10k interest as you are reducing the balance very quickly.
But as it's very clear that you should keep your current house, there is no need to get the calculations any more precise.
The difference is so huge, that I am wondering if I have made a mistake in my reasoning somewhere?
This assumes that Bank of Ireland do not try to take your tracker from you if you let your house. However, it's currently the practice of all banks except Danske Bank not to take a person's tracker in these circumstances, even if the loan agreement allows them to do so.
The difference may be even bigger than I calculate
I am surprised that BoI is giving you an 84% LTV loan while you already have a home loan. I assume that no other lender would approve you for a new mortgage. But if they do, your savings would be bigger as BoI is the most expensive.
After a couple of years with rental income coming in and with your LTV reduced, you should be able to switch to a cheaper lender on your home mortgage.
After 5 years, if you keep your investment property, it will be a very profitable investment as the interest rate is so low.