Which lenders (if any) will allow debt consolidation when Switching?

[SeamusH]

Hi all,

Semi-regular AAM poster going re-reg for this.

My question may be best asked by setting out the facts:

Mortgage balance outstanding: 235k (with BOI fixed at 2.9% until Mar 2023)
Property value: 350k - 380k
Term loan outstanding: 25k (CU loan c.530 p.m. repayment)
Age / Income Self: 39 y.o. / 91k p.a. (civil servant)
Age / Income Spouse: 38 y.o. / 22k p.a. (public sector)
Savings: Negligible - €3.5 in CU shares (increasing at 100 p.m.)

I'm looking into the possibility of switching ASAP and bearing a break fee, rather than waiting until next year when I may have missed the boat on the opportunity to fix for 4/5 years at near 2.0%.

My preference would be to try to switch mortgage and also consolidate the amount of the term loan i.e. draw down €260k to clear both the BOI mortgage and the CU loan. The intention then being to overpay the larger mortgage over the next few years by the €500+ p.m. of cash flow that's been freed up - this would save a couple of grand in interest while also allowing us more flexibility in the event of anything unforeseen happening. Part of the reason for wanting to consolidate is that a couple of the lenders I have my eye on, offer materially better interest rates for "High Value Mortgages" above 250k.

So in simple terms, my question is, am I deluding myself that the above is possible, and if not, which lender(s) should I be looking at? (I rang AIB a couple of days ago so I know they are out...)

Or is it simply a case of applying for a 260k switcher mortgage "with equity release", and not mentioning the term loan other than recognising the fact that it is a substantial monthly outgoing which impacts on capacity to repay the requested mortgage?

All helpful responses appreciated!

 

[Brendan Burgess]

There are two separate issues here, which need to be disentangled.

1) You have a very expensive Credit Union Loan. You don't tell us the interest rate, but let's assume it's 10% on the €25k. By switching this to a mortgage lender at 3%, you will save 7% of €25k or €1,700 in the first year. But this saving will come down quickly as you are paying off the capital very quickly on this.

So, it would be good to consolidate this, but it would not be the end of the world if you can't.

2) You have an expensive lender BoI. You should switch from them anyway, whether you can consolidate or not.
What rate can you get on 235k? with a 67% LTV?

You could fix with AIB for 5 years at 2.45% or for 4 years at 2.2% if you borrow €250k
Or with Avant for 7 years at 2.35%

But the first objective for you is to switch. If you can consolidate at the same time, that would be a bonus. But don't put off switching because you can't consolidate. And don't go for a more expensive lender just because they will allow you to consolidate.

Brendan

 

[Fahrenheit]

Hi,

The best rate available for you - based on the information provided(switch & clear a loan) - would be PTSB's 4 yr fixed rate product at 2.05%.

You'd have to pay for switching fees with PTSB(unless you qualify for a green mortgage - i.e. your property has an A/B BER) but you won't have any issues consolidating CU loan.

You'd receive a regular cash back sum of 2% of your monthly repayments - but not a lump sum.

However, I'm almost certain that the overpayment options are very restrictive with this lender.

I'm not sure if AIB will cover switching fees but Avant certainly won't - nor will Avant, or Haven for that matter, consolidate debt.

Finance Ireland & ICS allow debt consolidation but they've recently increased rates(both charge >3% now) so that should rule those providers out.


Your priority should be, as mentioned by Brendan, to get off that rate with BOI.




I hope this helps!



[email protected]

 

[Brendan Burgess]

The best rate available for you - based on the information provided(switch & clear a loan) - would be PTSB's 4 yr fixed rate product at 2.05%.

No, no, no.

This is going from the 2nd most expensive lender to the most expensive lender.

There is no point in getting a cheap rate for 4 years and then being exploited when the 4 years is up.

For example, if someone availed of what looked like a "cheap" ptsb rate 4 years ago, they would be now facing these horrible rates for existing customers:

Brendan

 

[Paul F]

The best rate available for you - based on the information provided(switch & clear a loan) - would be PTSB's 4 yr fixed rate product at 2.05%.

Avant are also offering a 4-year fix at 2.05%, and this PTSB rate requires a BER of B3 or better, whereas Avant's doesn't. Admittedly debt consolidation might be impossible with Avant but who cares given how high PTSB's follow-on rates are.

And, @SeamusH, if you can sneak into the <60% LTV bracket, you can get Avant's 1.95% rate.

You'd have to pay for switching fees with PTSB(unless you qualify for a green mortgage - i.e. your property has an A/B BER) but you won't have any issues consolidating CU loan.

This is not correct – you'll have to pay switching fees whether you go for a green or non-green rate.

You'd receive a regular cash back sum of 2% of your monthly repayments - but not a lump sum.

However, I'm almost certain that the overpayment options are very restrictive with this lender.

Not really – see this thread. But, again, PTSB's follow-on rates are terrible.

I'm not sure if AIB will cover switching fees but Avant certainly won't - nor will Avant, or Haven for that matter, consolidate debt.

AIB will cover switching fees – in fact, they'll give you €2,000 to switch.

And if your BER is B3 or better you are eligible for their 2.15% 5-year green fixed rate. And on that rate it is quite likely that you will be able to make unlimited overpayments without penalty for the foreseeable future (see this thread). Or you can go for Haven's 4-year green fixed rate (2.0% with €2,000 cashback).

Finance Ireland & ICS allow debt consolidation but they've recently increased rates(both charge >3% now) so that should rule those providers out.

Maybe, maybe not. You can fix for 15 years at 3.05% with Finance Ireland (and that will automatically fall to 2.9% as your balance reduces and you move, probably quite soon, into the <60% LTV bracket). And in the case of Finance Ireland you can "take your mortgage with you" – meaning that you get to keep the same interest rate if you move home in the future (subject to certain conditions).

PS @SeamusH, I'm guessing you fixed in March 2021 or March 2022. If so, your break fee will almost certainly be zero.

 

[peemac]

I'd avoid debt consolidation as it means your switching application is not run of mill and this can delay full approval and drawdown.

Simple no frills switching seems to be much quicker especially with Avant

Normally this would be a moot point, but there's a strong chance of fixed rates increasing soon, so time is of the essence.

Then use the monthly savings to accelerate the clearing of the cu loan.

 

[Brendan Burgess]

The best rate available for you - based on the information provided(switch & clear a loan) - would be PTSB's 4 yr fixed rate product at 2.05%.

Hi Justin

I was thinking a bit more about this.

I am very surprised that a mortgage broker would recommend ptsb.

The only situation I can imagine that one would do that, is where no one else will lend to the borrower - i.e. a borrower of last resort.

I assume your reason for recommending ptsb in this case is because they would do what the OP asked for , i.e. give him more money to clear the credit union loan.

I still think it's wrong to recommend ptsb , but even if there is justification for doing so, surely you should have pointed out the very high rates for ptsb customers when the fixed rate ends?

Paul has made a few other points as well, but the big one is why any broker would recommend ptsb or BoI.

Brendan