Consumer Corner: Five tips on how to save money on your mortgage

Beat the ECB interest hikes with these top tips from the experts

Beat the rate hikes with our top mortgage tips

Mortgage costs are rising. For many homeowners, they will see their mortgage repayments increase again from mid-November after the European Central Bank announced recently that it would be hiking interest rates for the third time this year. 

All is not lost, however, as we have compiled five tips on how to save money on your mortgage repayments.

1. Overpay your mortgage 

Experts claim that homeowners could save thousands or even tens of thousands of euro in interest by overpaying their mortgage.

Trevor Grant, Chairperson of the Association of Irish Mortgage Advisors (AIMA) says the larger your mortgage, the greater the interest bill “As overpaying your mortgage reduces the amount you owe, it will cut the interest bill you would otherwise face as well as limiting the impact of today’s higher interest rates on you.” 

Homeowners can typically overpay their mortgage by paying a lump sum off the loan or by increasing their monthly repayments. This will however depend on the lender and the type of mortgage you have. If you have a lump sum sitting in a deposit account which is earning little or no interest, it could be worthwhile using that lump sum to pay off your mortgage.

“Another big advantage of overpaying your mortgage is that you’re likely to be able to clear your home loan much earlier. Be sure that you can afford to overpay your mortgage before doing so though and that you won’t get hit with any early repayment penalties if you do so,” says Mr Grant.

2. Pay your mortgage off quickly 

The longer it takes to repay your mortgage, the more the interest will cost. 

Those in the know say that homeowners could save almost €100,000 by repaying a €300,000 mortgage over 20 years instead of over 30 years, assuming the value of the home they’re buying is €350,000.

3. Go Green 

There are some great deals on green mortgages and they can be worth looking into. Not all houses will qualify however, especially older houses but it is certainly worth doing your homework to see if you can save this way.

Joey Sheahan, Head of Credit at online brokers MyMortgages.ie says homeowners could save thousands in the first few years of their mortgage if they qualify for a green mortgage.

“Green mortgages are typically available to those who buy or own energy efficient homes but you may qualify for one if you already have a mortgage or if you’re topping up your mortgage.” To apply you will need a valid Building Energy Rating (BER) cert which will cost money to get but the savings could be much more.

“Some of the cheapest fixed rates currently available are for green mortgages. Bear in mind though that you must usually fix your mortgage to get a discounted green rate.”

4. Switch your mortgage

Mortgage holders could potentially save thousands by switching. Switching mortgage provider is not as easy as switching energy provider however but the rewards could be much greater.

“You could save a six-figure sum on your mortgage by switching to a cheaper lender, depending on the size of your home loan and how expensive your mortgage interest rate is,” says Mr Sheahan.

The Irish Mortgage Corporation, says that generally people will need to have had their mortgage for a minimum of 12 months before switching. Also in order to switch your mortgage, you will need to have a minimum of 10% equity in your home. There will also be some costs involved such as legal fees. Lenders will also look for documents such as payslips, bank statements and salary certs from switchers.

Many lenders will offer to cover costs but the most important element to consider is the lowest interest rate you can get. It is worth noting too that if you are on a fixed rate mortgage and plan to switch, you could be charged an ‘early breakage fee’ for doing so. Remember too that switching will take time and could even take up to six months to complete the process. Don’t forget to change your policies too such as your mortgage protection and home insurance.

“For most people in Ireland, your mortgage repayments will more than likely be your biggest outgoing every month. For this reason, it’s important to constantly review your options and be aware of better rates with other lenders which will result in savings for you,” says Mr Sheahan.

5. Ask for a better deal

There’s the old saying - if you don’t ask, you don’t get. Mortgages are valuable to banks and lenders so they will want to keep you as a customer.

Mr Sheahan says that whether you are trading up or you simply want to make your existing mortgage cheaper, ask your bank if it can offer you a cheaper interest rate. Open the conversation and you never know where it could lead. Also check out the rates on offer from your bank. They may have some attractive fixed rates that could suit you.