Irish Mortgage Corporation

Remortgage/Switching

Refinancing

Refinancing means paying off an existing mortgage and taking out a new one. Homeowners may choose to refinance for any number of reasons, including:

• Lower the interest rate on their existing mortgage
• Change a loan type
• Own their homes faster
• Take advantage of equity in their homes

Lower interest rate

Obtaining a lower interest rate on an existing mortgage is one major reason homeowners choose to refinance. By refinancing to a lower interest rate, homeowners can reduce their monthly mortgage repayments. However, there are usually some fees and costs associated. Generally, if a homeowner plans to remain at their current residence for some years to come, refinancing their existing mortgage to a lower rate should more than pay for itself over time! 

Change the loan type

Homeowners with a variable rate (or tracker) mortgage can change to a fixed rate by refinancing. This option can offer protection against rising interest rates and some peace of mind in the long term. As interest rates rise, so will mortgage repayments. Homeowners with a fixed-rate mortgage will have no increase in their monthly payments for the duration the rate remains fixed, i.e. 2-year, 5-year, 10-year etc. It is also possible to switch from a fixed to a variable rate mortgage. However, there are often costs associated with this option but the benefits can outweigh the costs over time. 

Own your home faster

Refinancing helps people own their homes faster.  Homeowners can do this by availing of a mortgage over a shorter term, reducing from a 30-year to say 15-year term. This option will work for those who can afford to absorb higher monthly mortgage payments. Generally, the longer the term on a mortgage, the more interest paid so a €100,000 mortgage with a 5.1% APR over 30 years will accrue interest charges of €95,462 while the same loan over a 15-year period will accrue interest charges of €43,281, a difference of €52,180. Mortgages should be reviewed and managed on a regular basis (about every two years).

Refinancing can help homeowners take advantage of the existing equity in their homes

Homeowners can borrow against the equity in their homes (equity refers to the current value of a house less any mortgage outstanding against it). However, banks generally restrict how much “cash-out” or extra cash a homeowner can borrow. Provided this option is used sensibly, it can be a much cheaper source of borrowing.  People may use this option to borrow for any number of reasons such as financing a wedding, buying a car and purchasing an investment property or holiday home.

In more recent years, debt-consolidation loans, that is, loans, which pay off outstanding balances on credit cards, personal and other loans have been gaining in popularity among homeowners. In this situation, homeowners should ask about a split-loan option. Using a split-loan option, short-term debts can be paid off in say a 3-year period while long-term loans (a mortgage) are paid over 15 – 30 years. Both loans will have the most competitive rates. This way, a homeowner will avoid paying a credit card balance off over 15 or even 30 years, which could end up costing more in the long term.

Do your homework

Irish Mortgage Corporation will do all of the legwork and more to make sure you get the best refinance / switcher mortgage rate.

WARNING: The cost of your monthly payments may increase. If you do not keep up your repayments, you may lose your home.

Warning: The cost of your monthly payments may increase, if you do not keep up your repayments, you may lose your home.
Warning: The entire amount you have borrowed will still be outstanding at the end of the interest-only period.
Warning: You may have to pay charges if you pay off a fixed-rate loan early
Warning: This new loan may take longer to pay off than your previous loans. This means you may pay more than if you paid over a shorter term.