Making Cents: Should you switch your mortgage to top up for home improvements?

Mortgage switching is one of those financial tasks that is promoted endlessly by mortgage experts but still viewed with suspicion by the general public.
Making Cents: Should you switch your mortgage to top up for home improvements?

Switching your mortgage can release funds for renovations

Given the enormous amount of time we have all spent at home over the past 15 months, it is no surprise that interest in redecoration and renovation is at an all-high. Home improvements ranging from a fresh coat of paint to whole new bathrooms, kitchens or building extensions are happening all over Ireland. And while smaller jobs can be paid for out of day-to-day spending, major works in many cases require borrowing.

A mortgage expert who is a keen advocate of switching to avail of better rates says this cohort of homeowners in particular are coming to realise the benefits of doing some research on your home loan. Martina Hennessy of doddl.ie says many mortgage holders who are looking to top-up for home improvements have chosen to shop around for better market rates as opposed to just topping up with their existing mortgage lender.

Mortgage switching is one of those financial tasks that is promoted endlessly by mortgage experts but still viewed with suspicion by the general public. Homeowners tend to remember the work involved in getting their initial mortgage and feel the savings can’t be worth the effort of doing it all again.

But as the most recent doddl.ie mortgage switching index has shown, the savings can be substantial.

Homeowners can be needlessly paying an average €4,090 in extra mortgage repayments per year by not switching lenders, according to the quarterly index.

The index is based on the average mortgage drawn down for new lending in both the first-time buyer and second-hand mover markets in Q1 2021, currently €253,562.

There is a 32% difference between mortgage repayments on the highest and lowest rates on the market, one that has widened from 28% a year ago.This means a saving of €135 per month for every €100,000 owed on a 25-year mortgage for those who switch.

And, while there is no question that completing a mortgage switch is a more complex process than signing up for a new phone contract or broadband deal, it may be simpler than you think.

doddl.ie Managing Director Martina Hennessy estimates it takes between six and eight weeks to complete a mortgage switching transaction. 

But, as she highlights, most of the mortgage holder’s input is at the research and application stage. After that it is largely a matter of letting the application take its course.

A survey of mortgage holders who switched with doddl.ie showed an average of six hours was spent between ‘research, compiling documentation, completing application forms and engaging professional valuation and legal services’.

Start with research. The Competition and Consumer Protection Commission has an easy-to-use mortgage comparison tool on its website and is a good place to start and see what is available. Mortgage switching platforms such as doddl.ie offer a free service with access to all major lenders in the market and a digital application process.

Next, paperwork.

“The largest body of time involved in the process is three hours for putting together the documentation for both the application and completion of the switch,” Ms Hennessy says.

Documents you can expect to be asked to provide include recent payslips and P60 (or audited accounts if self-employed), statements from your current account, statements from any personal loans and statements from your existing mortgage.

Finally, the legal bit. 

“Providing entry to the valuer and meeting your solicitor to sign the new loan offer takes on average two hours,” Ms Hennessy suggests.

There was a month-on-month leap of 30% in the number of new switcher approvals between February and March, driven by a surge of enquiries following the announcement of Ulster Bank’s exit from the Irish market.

“Irish mortgage holders generally pay up and, for the most part, don’t question the interest rate they are charged,” said Ms Hennessy.

“However, Ulster Bank’s announcement in February saw customers who ordinarily may not have considered switching taking control of their mortgage and, in doing so, saving themselves thousands.” The numbers switching mortgage in Q1 overall increased by over 15% on the same period in 2020, with more people using time during the latest lockdown to switch and save.

This trend is expected to continue, with the announcement of new 15 and 20-year long-term rates by Finance Ireland, and Avant Money reducing a number of their fixed rates, prompting those in search of security to consider switching.

High Speed Options

Eir have introduced a new broadband option for homes and businesses that cannot yet access high-speed wired broadband.

5G Broadband, the company’s 5G fixed mobile substitution (FMS) product, is a wireless broadband connection that uses your mobile network signal to connect to the internet. It enables customers to use Eir’s 5G mobile network to access data speeds which in many cases are much faster than available wired connections.

5G Broadband is €44.99 a month for the No Limits 5G data plan on a 12-month contract, with a one-off cost of €99 for the device ( Huawei 5G CPE PRO 2).

Customers can connect up to 20 devices within their home to the device, meaning busy homes will be able to download music, games, and HD videos in seconds.

To see if you can avail of this product, you can check your coverage on Eir’s mobile coverage map on their site at eir.ie/ourmobilenetwork.

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