Mortgage - low fee for breaking fixed rate

sternn · 04-04-2019 2:26pm #1

To summarise what I talk about below, it cost me €16 to save me over €50 a month in interest repayments by breaking from my fixed rate 3.2% to a new fixed rate term of 2.9%.

I'm not sure if this is the right place or not....but I'm currently with BOI and on a 3 year fixed rate mortgage at 3.2%, with still another year or so to go. I always understood they would charge you ridiculous fees for breaking your fixed rate mortgage (i.e. overpaying / moving to a different fixed rate product / moving to a variable rate / moving banks).

I was speaking to the bank today, and I have now moved my mortgage from the 3.2% fixed rate (with still around 1 year to go on the fixed rate + 30 odd years on variable) to the 2.9% fixed rate. The break charge for my fixed rate mortgage term (or funding fee as they call it) was only €16... and my monthly repayments are now going to be over €50 cheaper per month vs what I was previously on! So I'm now on a new 2 year fixed rate term for my mortgage but at 2.9%. I honestly didn't know it would cost me so little to move within a fixed rate. I understood that fees were very high when breaking out of a fixed rate. Another point to note, the same low fees apply if you want to do a bulk payment or switch provider (but additional legal fees for switching banks etc.. still apply).

This break fee / funding fee is different depending on term of mortgage and amount, but anyone who is on a fixed rate and their current bank is offering a lower fixed rate, investigate how much it will cost you to change by contacting your bank.

Hopefully this will save people with mortgages a few bob.

Steps for those that want to consider moving a better fixed interest rate product in their existing bank
Step 1: Get your mortgage account number, details of your current fixed interest rate
Step 2: Check out existing fixed rate mortgage interest rates (most have decreased in the last 6-12 months) and see if there are better rates than what you are currently paying.
Step 3: Contact the mortgages department of your bank and ask what your funding fee / break fee is if you want to exit your current fixed rate mortgage
Step 4: They will send out a letter containing the offer for you to sign and send back to them

JJJackal · 04-04-2019 2:28pm

sternn wrote: »

To summarise what I talk about below, it cost me €16 to save me over €50 a month in interest repayments by breaking from my fixed rate 3.2% to a new fixed rate term of 2.9%.

I'm not sure if this is the right place or not....but I'm currently with BOI and on a 3 year fixed rate mortgage at 3.2%, with still another year or so to go. I always understood they would charge you ridiculous fees for breaking your fixed rate mortgage (i.e. overpaying / moving to a different fixed rate product / moving to a variable rate / moving banks).

I was speaking to the bank today, and I have now moved my mortgage from the 3.2% fixed rate (with still around 1 year to go on the fixed rate + 30 odd years on variable) to the 2.9% fixed rate. The break charge for my fixed rate mortgage term (or funding fee as they call it) was only €16... and my monthly repayments are now going to be over €50 cheaper per month vs what I was previously on! So I'm now on a new 2 year fixed rate term for my mortgage but at 2.9%. I honestly didn't know it would cost me so little to move within a fixed rate. I understood that fees were very high when breaking out of a fixed rate. Another point to note, the same low fees apply if you want to do a bulk payment or switch provider (but additional legal fees for switching banks etc.. still apply).

This break fee / funding fee is different depending on term of mortgage and amount, but anyone who is on a fixed rate and their current bank is offering a lower fixed rate, investigate how much it will cost you to change by contacting your bank.

Hopefully this will save people with mortgages a few bob.

I wonder if its changing your mortgage from bank to bank thats expensive?

sternn · 04-04-2019 2:37pm

JJJackal wrote: »

I wonder if its changing your mortgage from bank to bank thats expensive?

From my understanding, fees involved in switching are a house revaluation (€150 - €300 + VAT) and legal fees (€1,200 - €2,000). Some banks offer to pay for some / all of those fees for switchers but should probably get financial advice for those.

Main point is, even without incurring all that, you can still potentially break a fixed rate term and move to a cheaper fixed rate / variable rate within the same bank for minimal fee.

jakdublin · 04-04-2019 2:39pm

JJJackal wrote: »

I wonder if its changing your mortgage from bank to bank thats expensive?

That is expensive. But the OP is right, people should check the cost of moving from a fixed to a better fixed rate. New EU rules were brought in a couple of years ago so banks can't screw you like they could before, but they are entitled to charge for moving. Every bank is different and it depends on the rate you're moving from, like how long you've had it, how long is left etc. Costs nothing to ask. Too many people just leave their mortgage when keeping an eye on rates can save a lot, even in the short term. Mortgage insurance is another thing worth checking, especially if you still have the original policy you took out when you first got your mortgage.

ygaurav · 04-04-2019 4:11pm

sternn wrote: »

To summarise what I talk about below, it cost me €16 to save me over €50 a month in interest repayments by breaking from my fixed rate 3.2% to a new fixed rate term of 2.9%.

I'm not sure if this is the right place or not....but I'm currently with BOI and on a 3 year fixed rate mortgage at 3.2%, with still another year or so to go. I always understood they would charge you ridiculous fees for breaking your fixed rate mortgage (i.e. overpaying / moving to a different fixed rate product / moving to a variable rate / moving banks).

I was speaking to the bank today, and I have now moved my mortgage from the 3.2% fixed rate (with still around 1 year to go on the fixed rate + 30 odd years on variable) to the 2.9% fixed rate. The break charge for my fixed rate mortgage term (or funding fee as they call it) was only €16... and my monthly repayments are now going to be over €50 cheaper per month vs what I was previously on! So I'm now on a new 2 year fixed rate term for my mortgage but at 2.9%. I honestly didn't know it would cost me so little to move within a fixed rate. I understood that fees were very high when breaking out of a fixed rate. Another point to note, the same low fees apply if you want to do a bulk payment or switch provider (but additional legal fees for switching banks etc.. still apply).

This break fee / funding fee is different depending on term of mortgage and amount, but anyone who is on a fixed rate and their current bank is offering a lower fixed rate, investigate how much it will cost you to change by contacting your bank.

Hopefully this will save people with mortgages a few bob.

Did you call their call center and they did that for you? What did your say? I am with BOI as well that's why I am asking this question

Atlas_IRL · 04-04-2019 4:12pm

The point about moving is that some banks can give you around 5k cash back for taking a mortgage out with them and that includes leaving. With fees around 2-2.5k for solicitor and legal fees that will leave you with around 2.5-3k for moving your mortgage.

My friend works in mortages and said one guy done it with 4 banks and pocketed around 10k for himself, maybe more.

jimmycrackcorm · 04-04-2019 4:17pm

Atlas_IRL wrote: »

The point about moving is that some banks can give you around 5k cash back for taking a mortgage out with them and that includes leaving. With fees around 2-2.5k for solicitor and legal fees that will leave you with around 2.5-3k for moving your mortgage.

My friend works in mortages and said one guy done it with 4 banks and pocketed around 10k for himself, maybe more.

I'd like to see actual examples of that because I think most give very little more than the costs involved in switching.

sternn · 04-04-2019 4:25pm

ygaurav wrote: »

Did you call their call center and they did that for you? What did your say? I am with BOI as well that's why I am asking this question

I called their mortgages department - 01 611 3333 and said I'd like to investigate moving my mortgage to a better interest rate product. I asked how much it would cost me to break my fixed rate and move to the better rate. They are sending me out a letter with the details of my options, and I have to then sign and send back as far as I know.

Wheety · 04-04-2019 4:30pm

I'm with KBC and it cost nothing to break out of the fixed rate.

tommythecat · 04-04-2019 4:39pm

jimmycrackcorm wrote: »

I'd like to see actual examples of that because I think most give very little more than the costs involved in switching.

Well KBC give you 3k for switching. Most solicters do the switch for 1.5k and the valuation is around 150 euro so that leaves you with well over 1k for switching. I am in the middle of the process myself.

Look at this thread where some people are switching between a load of banks in a short period and making a lot of money. It's tricky but it seems to work for some people.

https://www.askaboutmoney.com/threads/advice-on-making-the-most-of-switcher-offers-what-order.208709/

lawred2 · 04-04-2019 4:41pm

JJJackal wrote: »

I wonder if its changing your mortgage from bank to bank thats expensive?

broke out of a BOI fixed rate to go to PTSB for the 2% cashback - cost me €200

lawred2 · 04-04-2019 4:42pm

jakdublin wrote: »

That is expensive. But the OP is right, people should check the cost of moving from a fixed to a better fixed rate. New EU rules were brought in a couple of years ago so banks can't screw you like they could before, but they are entitled to charge for moving. Every bank is different and it depends on the rate you're moving from, like how long you've had it, how long is left etc. Costs nothing to ask. Too many people just leave their mortgage when keeping an eye on rates can save a lot, even in the short term. Mortgage insurance is another thing worth checking, especially if you still have the original policy you took out when you first got your mortgage.

not necessarily

it's no longer at the discretion of the bank - it's a fixed calculation based on funding costs

masterboy123 · 04-04-2019 4:43pm

What about solicitors fees?

lawred2 wrote: »

broke out of a BOI fixed rate to go to PTSB for the 2% cashback - cost me €200

VW 1 · 04-04-2019 4:47pm

jimmycrackcorm wrote: »

I'd like to see actual examples of that because I think most give very little more than the costs involved in switching.

I switched from EBS to BOI to get 2% cash back, plus an extra 1% at the end of a 3 year fixed period. Solicitor fees plus VAT were 950 as well as 80 quid to pay the valuation agent. Safe to say that it was worth the effort of the forms and document gathering.

Will be doing the same at the end of the fixed period also.

lawred2 · 04-04-2019 4:48pm

masterboy123 wrote: »

What about solicitors fees?

Well that's a separate concern. That's got nothing to do with the cost of breaking out of a fixed rate mortgage.

Klonker · 04-04-2019 5:47pm

VW 1 wrote:

I switched from EBS to BOI to get 2% cash back, plus an extra 1% at the end of a 3 year fixed period. Solicitor fees plus VAT were 950 as well as 80 quid to pay the valuation agent. Safe to say that it was worth the effort of the forms and document gathering.

pretty sure the 1% is after 5 years with BOI.

cruizer101 · 04-04-2019 6:10pm

lawred2 wrote: »

Well that's a separate concern. That's got nothing to do with the cost of breaking out of a fixed rate mortgage.

Its not separate at all, if moving bank it has to be taken into account. Generally the bigger saving will be by moving bank, and any cashback type offers will require moving bank also.

lawred2 · 04-04-2019 6:40pm

cruizer101 wrote: »

Its not separate at all, if moving bank it has to be taken into account. Generally the bigger saving will be by moving bank, and any cashback type offers will require moving bank also.

That's a total cost question. And every solicitor will charge differently.

This thread is about the fee banks charge for breaking fixed interest mortgages.

Solicitor would charge the same regardless of whether you switched from a variable rate or broke a fixed rate.

So while it's relevant to total cost of switching. It's not relevant to this thread.

cojomo2 · 04-04-2019 6:43pm

Wheety wrote: »

I'm with KBC and it cost nothing to break out of the fixed rate.

So am I..I was quouted €240 this week. That was to break a fixed mortgage of 145k with 18 months remaining. When were you told it would be free?

Bobeagleburger · 04-04-2019 6:45pm

cojomo2 wrote: »

So am I..I was quouted €240 this week. That was to break a fixed mortgage of 145k with 18 months remaining. When were you told it would be free?

How did they calculate the 240?

Sounds excessive

cojomo2 · 04-04-2019 6:46pm

RoboKlopp wrote: »

How did they calculate the 240?

Sounds excessive

Using some formula that they all use based on guidance from the central bank I believe.

cruizer101 · 04-04-2019 6:53pm

CPCC have a good mortgage comparison tool for checking different rates.
Although it doesn't detail cashback offers.
Also good to check what your ltv is, as there are better rates for lower ltv,
generally the change of bands are 80%, 60%, 50%,

cruizer101 · 04-04-2019 7:11pm

lawred2 wrote: »

This thread is about the fee banks charge for breaking fixed interest mortgages.

The thread is about the savings that can be made by breaking a fixed rate mortgage, in particular the fact that breaking fees are a lot less than many think.

However the other costs are not irrelevant. That's like saying alcohol is cheap in another country and the cost of getting it here is irrelevant.

For overall savings, which is what people are going to be interested in, the whole picture of all costs is important

The_B_Man · 04-04-2019 7:15pm

I'm with BoI as well.
If I do this, do I have to go thru the whole mortgage application process again? Bank statements and all the rest?

lawred2 · 04-04-2019 7:29pm

cruizer101 wrote: »

The thread is about the savings that can be made by breaking a fixed rate mortgage, in particular the fact that breaking fees are a lot less than many think.

However the other costs are not irrelevant. That's like saying alcohol is cheap in another country and the cost of getting it here is irrelevant.

For overall savings, which is what people are going to be interested in, the whole picture of all costs is important

Mortgage - low fee for breaking fixed rate

mayota · 04-04-2019 7:35pm

The_B_Man wrote: »

I'm with BoI as well.
If I do this, do I have to go thru the whole mortgage application process again? Bank statements and all the rest?

No, not if you’re staying with BOI.

flugel · 04-04-2019 11:19pm

This is how I understand it

Under a fixed rate contract but break it to avail of newer lower rates to stay with same mortgage provider, you have a breakage fee to pay. This fee changes and is recalculated every day

If you break within a fixed rate contract to switch mortgage providers you have the above breakage fee plus you also have a redemption fee to pay

Ive been told by my mortgage provider, bank of Ireland, that the breakage fee can be as low a zero

I don't know how the redemption fee is calculated and if that can also potentially be as low as zero

bazz26 · 05-04-2019 12:14am

To my knowledge a redemption fee is when you are settling the mortgage in full or moving to another lender before your current fixed term finishes. I don't think that applies where you are just moving to a different interest rate and staying with the same lender.

Another tip for paying less interest over the term of the mortgage is to look at paying a little extra every month off the capital amount borrowed, on top of your normal mortgage payment. Even if your in a fixed rate term you can still pay upto 10% extra of your monthly repayment without penalty. With a variable rate you can pay as much off as you want or can afford. As mortgage interest is normally calculated on a daily basis, paying a small amount every month off the amount borrowed actually reduces the amount of interest you are paying over the entire term of the mortgage.

So for example with the OP, that €50 per month saved by switching to a lower interest rate could be put towards reducing the amount borrowed every month instead meaning less interest paid over the entire term of the mortgage. Doesn't seem like much but over time it does add up.

05-04-2019 12:21am

cojomo2 wrote: »

So am I..I was quouted €240 this week. That was to break a fixed mortgage of 145k with 18 months remaining. When were you told it would be free?

Am I reading that right? You've got a €145,000 mortgage, and 18 months left on it (ie: about €8,000 per month?).

Surely, if you're doing such massive payments, you wouldn't care what the interest rate was, because you'll be paying a trivial amount anyway, at the speed with which you'd be blowing through the mortgage?

bazz26 · 05-04-2019 12:24am

I assume the original amount borrowed was 145k rather than the amount owing with 18 months to go.

05-04-2019 12:28am

bazz26 wrote: »

I assume the original amount borrowed was 145k rather than the amount owing with 18 months to go.

I re-read it again, and I think he means 18 months remaining of his fixed term? I'm not sure, to be honest. Would make more sense than my initial thought process of it.

bazz26 · 05-04-2019 12:30am

Gotcha.

Cyrus · 05-04-2019 4:14am

Just to clear some things up I think people are confused by .

There is a specific formula the banks are supposed to use to calculate your break fee from a fixed mortgage and it’s calculated on the interbank rate when you took out the loan v the day you request the cost for breaking.

That fee is the same whether you are switching to another product with the same bank or moving to another bank.

Obviously moving to another bank has other costs including valuation and solicitor fees.

Two examples that I know of personally is one person who took a 700k mortgage with Ebs (variable rate) and got 2% cash back, switched to boi 4 months later and also got 2 % cash back (fixed rate) and then had a no fee break from boi 6 months later to move to ub getting 1,500 from them to cover switch costs and fix f at the 5 year 2.5% rate. Pretty easy net 25k or so.

Another person had fixed at 3% with ub a few weeks before they brought out a 2.6% fixed rate, they wouldn’t move him , advised him to request a break fee, hey presto it was 0 so be broke and refixed at the lower rate and I believe did it again to get the 2 year 2.3%.

All depends on interbank rates and if switching banks the size of your mortgage to see if it makes sense to do the switch for cash back etc

cojomo2 · 05-04-2019 6:25am

Deleted User wrote: »

Am I reading that right? You've got a €145,000 mortgage, and 18 months left on it (ie: about €8,000 per month?).

Surely, if you're doing such massive payments, you wouldn't care what the interest rate was, because you'll be paying a trivial amount anyway, at the speed with which you'd be blowing through the mortgage?

18 months left on the fixed term.

Marcus Rashford · 05-04-2019 6:36am

- Banks are now compelled to use a set methodology to calculate fixed mortgage break fees; with interest rates relatively low and base rates plus bank funding costs so low, the methodology tends to yield a favorable result

- Some banks will pay up to 3% of the value of the mortgage to switchers (with the final 1% payable down the line)

- Legal fees for a switch tend to be okay; €1,500 seems to be the typical number

- There are people who have switched two or three times in the space of 6-12 months and pocketed the incentive each time

KD11 · 05-04-2019 7:36am

Went in to boi last week and was told the break out fee with less than a year left on a 5 year fixed term for a very small mortgage was €590. The person I was dealing with was shocked as she was expecting it to be a "couple of euro" at most. It annoyed me so much I'm now in the process of switching banks.

cojomo2 · 05-04-2019 7:44am

KD11 wrote: »

Went in to boi last week and was told the break out fee with less than a year left on a 5 year fixed term for a very small mortgage was €590. The person I was dealing with was shocked as she was expecting it to be a "couple of euro" at most. It annoyed me so much I'm now in the process of switching banks.

I dont think its anything to do with BOI, as stated by another poster a specific formula is used to calculate..the amount to break will change daily depending on interbank rates.

Ush1 · 05-04-2019 8:21am

KD11 wrote: »

Went in to boi last week and was told the break out fee with less than a year left on a 5 year fixed term for a very small mortgage was €590. The person I was dealing with was shocked as she was expecting it to be a "couple of euro" at most. It annoyed me so much I'm now in the process of switching banks.

I had to pay I think 1200 before with UB to switch from one fixed to another but it still worked out cheaper in the long term.

nok2008 · 05-04-2019 8:40am

Hi,
i have just changed my mortgage from AIB and BOI and my costs were;
solicitor 1500
valuation 150
There were additional costs as i was putting on extension but they can be ignored for this conversation.

I got cashback of 2% plus if i stay for 5 years i get another 1% back. Well worthwhile for me to do even if i do not stay for the 1%.

For me i will be getting roughly 7k cashback (not including the 1%) which would mean that i would have to earn 14K before tax to earn this. If you divided that by the 15 hours work that i did it would effectively mean my gross wages per hour is effectively €933 per hour. WIsh my main job paid so well.

My changeover was more complicated as we were building but i would estimate about 10-15 hours work in total. Other person in work rang around for herself but she changed rates with the bank that she was with over the phone in 5 mintutes and saving 100 per month.

Big savings to be had though for small amount of work. However in order to make a "profit" you have to have a large mortgage. Looked at details for another person and they had smallish mortgage of 100k and no profit in moving even though drop in interest rate from 3.2% to 2.9%.

Also what people have to be aware of is the lowish fixed rate interest rates out there. Some of the lower banks have higher variable, so when your say 2 year fixed is over and then you might have to change banks again and you may lose all your savings with the solicitor fees.

Cant understand why more people dont look at these options, especially with Loan to value ratio with the massive increase in "valuation". We had nearly a 55% LTV and we were paying the higher >80% interest rate. NO solicitor fees for moving within the same bank.

I am in month 2 of the mortgage and was looking at options for changing once my 1 year fixed is up (10 months time) but from this thread i can do it at relatively low cost which is great to know.

flugel · 05-04-2019 8:40am

When switching Mortgage providers do you also have to take out a new mortgage protection policy?

The original hardly stays valid as you are entering into new contracts with new mortgage providers each time?

PhoenixParker · 05-04-2019 8:46am

cruizer101 wrote: »

Its not separate at all, if moving bank it has to be taken into account. Generally the bigger saving will be by moving bank, and any cashback type offers will require moving bank also.

You dont necessarily have to move bank though.

I've lowered my rate twice by revaluing the house and getting a better ltv rate.

Way less hassle then moving banks.

nok2008 · 05-04-2019 8:52am

All you need to do is reassign your current mortgage protection to the new provider. A phone call to arrange and they send the documents out for signing. The new bank will try to get you to change but will more than likely be dearer as you are older and more risk.

You will also have to assign the new mortgage provider to your house insurance.
The above assumes no increase in amount being drawn down.

cruizer101 · 05-04-2019 9:00am

bazz26 wrote: »

Another tip for paying less interest over the term of the mortgage is to look at paying a little extra every month off the capital amount borrowed, on top of your normal mortgage payment. Even if your in a fixed rate term you can still pay upto 10% extra of your monthly repayment without penalty.

Jusr on this the amount you can pay of varies by bank I think the minimum would be 10% of monthly payment. But many are higher, UB who I am with you can overpay 10% of the remaining principle per year. So 300k mortgage you can overpay 30k per year, fair play to anyone who can reach that. I'm pretty sure KBC are the same and other banks may well be more than the 10% monthly.

Cee-Jay-Cee · 05-04-2019 9:54am

Just a matter to note for people with BOI (or any other bank) wishing to break out of a fixed rate to a lower rate, the charge for breaking from a fixed rate depends on the markets for the day your application is processed. For example, I rang BOI a few minutes ago and there is no fee if you applied had your application granted today however next week there could be a charge (it shouldn't change too drastically unless there is some huge shift in the markets but with Brexit, god only knows what may happen) Anyway I have asked them to send me out the paperwork and will decide from there. I would save €20 a month dropping to the 2.9% rate from my current 3.1% rate which I've been in for the last 2 years. My fixed rate is due to end in October this year.

KD11 · 05-04-2019 10:46am

cojomo2 wrote: »

I dont think its anything to do with BOI, as stated by another poster a specific formula is used to calculate..the amount to break will change daily depending on interbank rates.

She did say that but had no idea why some people have to pay a few euro and others a few hundred euro. One customer wanted to break 6months into a 3yr term (€300,000) and it actually cost them zero. Like someone else mentioned it can change week by week what figure you get. If i have to pay that amount anyway, I may as well switch banks.

th283 · 05-04-2019 10:50am

nok2008 wrote: »

Cant understand why more people dont look at these options, especially with Loan to value ratio with the massive increase in "valuation". We had nearly a 55% LTV and we were paying the higher >80% interest rate. NO solicitor fees for moving within the same bank..

Does the LTV make a big difference in repayments? I took out a mortgage last year with a 90% LTV, renovated the house and going by comparable houses the LTV should be about 65% now, is it worth my while talking to BOI about it?

sternn · 05-04-2019 10:54am

th283 wrote: »

Does the LTV make a big difference in repayments? I took out a mortgage last year with a 90% LTV, renovated the house and going by comparable houses the LTV should be about 65% now, is it worth my while talking to BOI about it?

Definitely contact the bank. Most people don't bother ever getting their house revalued for mortgage purposes. Banks generally offer better interest rates as the LTV gets lower.

browne_rob5 · 05-04-2019 11:13am

th283 wrote: »

Does the LTV make a big difference in repayments? I took out a mortgage last year with a 90% LTV, renovated the house and going by comparable houses the LTV should be about 65% now, is it worth my while talking to BOI about it?

Yes if your LTV is less than 80% you should drop to a lower interest rate.

nok2008 · 05-04-2019 11:18am

just checked there.
The LTV makes no difference on fixed interest rates for BOI.

However variable as below for BOI;
<60% - 3.9%
61-80 4.2%
>80 - 4.5%

https://personalbanking.bankofireland.com/borrow/mortgages/rate-table/

I think that the difference is bigger for aib but check the websites if necessary.
THere are some good mortgage broker sites out there that you can run through the difference options very easily as the bank websites are a bit clunky and harder to use and you will easily be able to see what the different repayments are. Only fee for moving internally in the bank miught be a valuation of 150.

grahamor · 05-04-2019 12:08pm

Are BOI likely to offer you a better rate if you are considering breaking out of a fixed rate and switching banks ?

userfriendly · 05-04-2019 12:09pm

Thanks for tip OP

Tried today with KBC but would be over 2 grand to break but she said it changes daily so I should ring back in a week or two

I should have asked when I was on the phone but anyone know if these market rates are publicly available?

It's only a 5 min call but it would be useful to know when it's favourable to ring so less wasting everybody's time

Mortgage - low fee for breaking fixed rate

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