Home / How to work up to three weeks less in 2020 by switching your mortgage

Irish home owners could work three weeks less in 2020 by simply switching their current mortgage from the highest rate.

And the process can be less painful than most popular New Year’s resolutions according to a top mortgage switching expert.

Couples earning the average wage and on the highest mortgage rate are working nine hours every month just to service needless interest payments of €3,498 a year, according to Doddl.ie Managing Director Martina Hennessy.

“By switching from the highest rates available on the market one of them could take three weeks unpaid off work and still be in the same net financial position,” she said.

“If a gym guaranteed similar tangible results within six to eight weeks, new year’s resolutions would be a no-brainer.”

The current spread between the highest and lowest interest rates available on the market is 2.25% or €3,498 in annual repayments for an average private house mortgage, according to the Doddl.ie Index.

“If a married couple, both earning the average wage of €38,871, with an after-tax income of €62,111 are on the highest variable rate, they will be working over nine hours a month to repay the additional interest of €291 per month on the average mortgage of €243,512,” said Ms Hennessy.

“A bit like the new year gym membership, psychology plays a huge part in mortgage switching, with some people feeling that it is a really complex process, so they do nothing.

“However, recently introduced Central Bank measures make it far easier for consumers to switch mortgage lenders.

“It is important to know that banks offer cashback or switcher packages which generally means that there is no cost to you to switch mortgage lender.

“Just as motivations for new year’s resolutions can be different, consumers switch their mortgage for different reasons.

“When I look at why our customers switch mortgage they can be broadly categorised as those under 40 years tending to simply want to lower their monthly repayments.

“They also tend to opt for a cashback option which in some cases affords them up to 3% of their mortgage back in cash at a time when most will have wiped out savings on the deposit to purchase their home.

“Those between 40 and 45 are more inclined to release equity for home improvements or to reduce repayments so as to take parental leave to spend more time with children.

“Those over 45 are more interested in reducing the term of their mortgage by keeping their repayments the same, but at a lower interest rate. This can have a huge impact on your mortgage term.”

Taking an average mortgage amount of €243,512 on a 4.5% rate over 25 years, the mortgage holder is repaying €1,353.52 per month, according to the Doddl.ie Index.

“If they kept this repayment but were eligible for the lowest market rate of 2.25% then they could reduce their mortgage term by over six years,” said Ms Hennessy.

“With such choice on market with regard to rate and cashback offers it is important to get impartial advice to help you understand all mortgage switching options available to you, rather than directly responding to a marketing message from an individual bank.

“If you go to a particular bank because you have seen their ad, then all they are going to offer you is their own rates.

“When you go to an impartial mortgage broker, they will look at your overall financial position, how long you have left on your mortgage, the stage of life you’re at, and will give you impartial advice on the option that’s right for you.”