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Dublin: 12 °C Monday 23 October, 2017

5 common beliefs about mortgages that are actually total myths

They’re actually a lot more flexible than you might think.

shutterstock_699239209 Source: Shutterstock/baranq

BUYING A HOUSE in Ireland, especially in an urban centre or along the commuter belt, can be a hugely stressful process. Finding a home is only the beginning, though – securing a mortgage repayment plan that suits your long-term needs and budget is another challenge entirely.

However, we’d like to reinforce that there are a number of reasons why you shouldn’t feel imprisoned in a mortgage. As a consumer you have a right to some flexibility, even with the biggest bill of your life, you still have a right to switch.

With that in mind, here are five of the biggest mortgage myths, debunked…

Myth 1: You’ll get the best deal with the bank you’re with

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It’s an expensive misconception that you must get a mortgage with your current bank, and that the few options they offer are the only ones available. A simple glance at the CCPC’s mortgage comparison will prove that there is a lot more choice.

This is particularly important for anyone whose LTV (Loan-To-Value) may have reduced as a result of their home increasing in value – it’s these customers that potentially stand to really benefit from a switch in mortgage provider down the line.

Myth 2: Switching is not worth the hassle

shutterstock_377712442 Source: Shutterstock/wong yu liang

If you’re considering switching mortgage provider but are uncertain whether it’s worth it, some brief calculations should help you figure things out. There’s even a CCPC mortgage comparison to make things easier

Here’s an example: say you have a remaining balance on your mortgage of €250,000 and your house has a market value of €350,000. Your remaining mortgage term is 25 years and your current monthly repayment is €1,350 on a variable interest rate.

Additional costs like legal fees aside, if you switched to a lower rate, you could potentially save €125 each month. That’s approximately €37,530 over the lifetime of the mortgage.

Myth 3: Anyone can switch mortgages

shutterstock_270461549 Source: Shutterstock/Andrey_Popov

Most people will find they can switch, once they have all the correct documentation in place, but there are exceptions. If you have a tracker mortgage, it will probably not be worthwhile switching as your rate will likely always be lower than anything that might be available on the market.

If you have a very high LTV (loan-to-value) or negative equity you may not be able to switch to all lenders. If you have a fixed-rate mortgage and you move your mortgage during the fixed term, there are charges associated with that. Generally people would not switch their mortgage during the term of a fixed-rate – they would wait until the end of it.

Myth 4: You are locked into your repayment period

shutterstock_457676434 Source: Shutterstock/Africa Studio

If you’ve opted for a 35-year house loan and your circumstances change – you get a higher-paid job for example – it is absolutely possible to arrange that you pay your mortgage back in a shorter time than you signed up for.

Equally, if you need more time on a 20-year mortgage, it also may be possible to lower your payments each month by extending the repayment period further, provided your mortgage is not a fixed-rate one.

Myth 5: You are bound to your mortgage provider

shutterstock_538621282 Source: Shutterstock/WAYHOME studio

Although it’s the biggest financial commitment you’ll ever make, you’re not necessarily tied to sticking with the mortgage provider you opted for at the time.

It’s always worth checking whether a different mortgage provider could make your life easier, and could save you money in the long term.

Find out if you could save money by switching your mortgage. Take a look at CCPC’s guide to switching mortgages to see if you might be eligible to switch. Alternatively, have a look at their handy mortgage comparison tool to consider your options right now for a more manageable mortgage.

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