What do most of us have......really really desperately wanted it initially..........but now we really really want to get rid of (a clue, it's not your partner!).................the answer is of course our mortgage!
We have covered mortgages a few times on here, including the ever popular 'should I clear my mortgage or save for the future' episode. This week we are going to ramp up the pressure on existing mortgage holders, we are going to hold a mirror up to them and their habit, and indeed inertia! In a survey we held earlier this year we asked how many of you believed you were on the best possibly mortgage rate.....interestingly 70% of people were not sure!
That points to the fact that people aren't informed as to the best mortgage rates in Ireland at the moment, and whether they are getting the best deal available or not.....we are going to fix that right now! Switching mortgage in Ireland for some reason is no that popular versus many other states, however for some it can be a very financial prudent thing to do!
Firstly, thanks for checking out Ireland's #1 Financial Planning Blog & Podcast, we are delighted to have you visit! By all means please do check out our 'why' which will explain why we are creating this blog and podcast every week for our listeners and readers! Also, thanks a mill' to our latest iTunes Reviewer, it means a lot to us, so please do pop over and leave a review if you have a minute!?
Can I Switch My Mortgage?
There's no point in getting all excited about the benefits of switching mortgage (there can be many!), if it is not available to you....here's what you'll need to prove:
Should I Switch My Mortgage?
Another humdinger of a question! We can't answer that question for you, but we can show you how to answer it for yourself. There are lots of comparison websites in this country, and there is no doubt that they help people get better deals. They make their money from people switching. There is also a government funded switching site that is pretty awesome, which we are big fans of here, and that is the Competition & Consumer Protection Commission website (I think they could do with some help on the name of the site in fairness!). It's a fabulous and totally un-biased site which is updated daily.....check it out here.
All you need to have to hand in order to do a comparison is the following:
Be careful with number 4. Make sure that the figure you put into the calculator is the amount you are paying toward the mortgage each month. So of us have home insurance or mortgage protection included in the same direct debit. Make a phone call to your lender if needed in order to determine exactly how much the mortgage repayment is on it's own.
Whack the figures into the calculator and select whether you want to compare it to best Variable rates, or Fixed rates of the various terms 1 year to 10 year.
What is APRC?
In the next section you will see APRC referred to when detailing two different rates of interest on a mortgage. This stands for Annual Percentage Rate of Charge (as if we needed another acronym!). It is however the only accurate way to compare two rates as it includes all charges in the rate, including set up charges. It is common to see an interest rate quoted of say 3%, however the APRC is almost a full 1% (3.9%)......moral of the story is that you go with the APRC in comparing loan rates......now that we have that cleared up lets get on with the story for you....
How Much Could I Save By Switching Mortgage? A real-life story!
We want to share a real-life story with you. A friend of the show, we'll call him Jimmy, got in touch to tell us that on the back of a recent blog/podcast we did he went on the hunt to reduce his mortgage payment. He shared his story with us, and invited us to share it with other listeners so that they could too benefit from it.
Jimmy lived in his house with his wee family. The house was valued at around €290k. He had a mortgage of €170k, and was paying €915 per month. The rate was 3.9%. There were 25 years left on the mortgage. Jimmy and his partner are in their 30's.
They shopped around for the best rate mortgage they could find. They managed to find a market leading fixed rate of 3.05%, for a 10 year fixed mortgage. They were keen to fix it for the medium to long term as they wanted that security knowing it would not increase in future, that was important to them. This rate was subject to them switching their current account, which they were happy to do.
In addition they were going to get 3% Cash-Back provided the loan was drawn-down before March 2018. They were both working and earning the same salaries as when they originally took out the mortgage, with a clean payment history.
They got the ball rolling on the new loan via a broker, informed the original lender of their plans, and then followed the process with the new lender. Essentially the new loan goes directly across to clear the old loan, one cancelling out and replacing the other.
They are now paying €90 per month less than they were on the old rate, with the term the same as the original mortgage (they had the option of reducing the term but they wanted to keep it as long as possible for now). They also got €5,000 Cash-Back recently which has helped them hugely! All complete in a little under 3 months! yes they had to pay a solicitor €1,200 for the legal side of things, and there was some time invested in meetings and gathering info, however.....
Over the term of the mortgage this switch, including the Cash-Back, stands to benefit them €32,000! Delighted for them!
What About The Insurances?
When switching do try and keep your existing Mortgage Life Cover, provided it is the most appropriate cover for you (worth taking this opportunity to make sure it is actually!). Your original lender would need to 'release interest' in the policy before the new lender can note it on the new loan ('assign it'). It is always prudent to make sure it is 'assigned' to the new loan so that in the event of a death the benefit goes directly to the lender to clear the loan.
Also really important obviously to make sure there are no 'gaps' in cover if you are cancelling or replacing either the Mortgage Life Cover or the Home Insurance.....if something tragic were to happen during that 'gap' you could be left in dire straits!
Are There Another Other Options?
Your existing lender might well be able to do you a better deal than you currently have! You may not need to switch lender in order to get a better mortgage deal, saving you the time, hassle and expense which comes from moving to the new lender (documentation, solicitor fees etc). So if you have decided to switch it is always worthwhile contacting your current lender and telling them your gone unless they can do something similar for you!
So there you have it.......the 'can I', 'should I', 'how do I', 'what will I save' of the mortgage switch conversation.....do be a legend and share this with your peers and anyone who you reckong would benefit from knowing about this.
Thanks for reading, you're a legend!
Paddy Delaney
QFA | RPA | APA | Qualified Coach
Welcome to another episode of Ireland's #1 Financial Planning Blog & Podcast.
This week we have a cracking interview with UK's Jason Butler, where we discover some tips and guidance on achieving financial well-being, getting our lives the way we want them to be.
Jason has super insight on this aspect of life, and is now living his message.......most of us will hopefully take a few nuggets from this interview (I'm not taking any credit there!).
Be sure to check out our wee website, our why, and if you like the show then an iTunes review would be a much appreciated gesture to us.......You're a legend!
Enjoy,
Paddy Delaney
QFA | RPA | APA | Qualified Coach
This week we are aiming to share some slightly different insights, and reveal some major news in the world of Financial Services in Ireland! Last week the Central Bank released a proposal which is due to come into force next year (subject to Dept. of Finance), which is aimed at maximising the protection consumers get when it comes to buying any financial products....we have dissected all the Publications released by Central Bank to determine the details, and it's an interesting one!
Firstly, thanks for checking out Ireland's award-winning Financial Planning Blog & Podcast, we're delighted to have you join us. We'd be thrilled if you had the time to check out our 'why', and to learn a little about what we are trying to do, for you our reader.
The Green-Grocer!
Indulge us for a few moments, trust me it'll make sense shortly! Imagine that you are walking down the road after getting off your bus from work, and you notice a shiny new green-grocer shop on the corner. It's called 'Gerry's Independent Stores'...sounds good to you!
You walk in and the friendly green-grocer welcomes you with a big smile, a warm welcome, and inquires as to how he can help you.....you are taken aback at his hospitality and part of you reckons 'I'm gonna be sold something here'....therefore you reply in the usual way and state that you are 'just in for a look'!
The shelves are stacked high with produce, so much choice of all your staple items, different versions of everything......you are confused with the level of options and so ask for some help with regards picking the 8 items you actually do need, milk, bread, broccoli, ham, cheese, yoghurt, apples & grapes (you healthy divil you!).
Before you know it the kind shop keeper picks out a version of each of the 8 items, in addition he tells you that he has a special rate going on the eggs, asparagus, Mars Bars, and Ice-Cream and he encourages you to buy those as well. You reckon that you actually probably could use these other items so you agree to buy them.
You go to the counter, pay for your stuff and happily head on off home with your shopping for the next few days done, and away home to make the dinner!
How Did The Green Grocer get Paid?
It is only the next day that you hear from a mate that the Green-Grocer actually makes more profit on certain options than on others. He picked the options for you that result in him getting the most profit. He also invited you to buy more stuff, because it turns out he gets a large bonus from the provider of the eggs, asparagus, Mars Bars and Ice-Cream if he sells a certain amount of it. In fact, he actually also get a holiday every year if he sells certain amounts of it to his customers. He might also actually get support to pay for advertising and marketing if he agrees to only sell that particular producers product....how do you feel now? Some people might feel like that is what they expect, others might not care less, while others might feel that they were being encouraged to take and buy stuff that might not have been the things that they needed or wanted! Again, how would you feel?
How Are Financial Advisors Paid?
It will be no surprise to majority of you to hear that most Financial Advisors & Intermediaries, Banks, Brokers are paid in a similar way. Majority of Brokers, Banks & Advisors (also known as Intermediaries- i.e the seller of products on behalf of a product producer) get paid commission when they sell a certain product. It is also known that some get paid more for selling a certain product, and indeed get paid bonuses if they sell a certain amount of certain products from certain providers....all very certain!!
It appears to us that the Central Bank are on a mission to increase the transparency that you the consumer has in regards how your 'Green-Grocer' is paid by the providers. In fairness that makes total sense. As we keep banging-on-about here, the focus of the industry has for too long been lazered onto selling products as opposed to delivering the real outcomes that consumers need and want....more often than not a product is required, but it should not be the starting point of the conversation!
What Will Change For You, The Customer?
In essence what the Central Bank appear to be aiming towards is a situation where there is a full and clear menu available to the customer as soon as they look up the 'Green-Grocer' online....you the customer will be able to see exactly what the grocer is paid from each provider, in advance of you actually going into the shop.
The impact of this would be that the next time you go into 'Gerry's Independent Stores' you will know how much Gerry will make if he sells Brocolli A, Brocolli B, or Brocolli C.....again all about improving the transparency for the shopper.
Also, when it comes to mortgages, the Green-Grocer is currently paid a % of the loan that the customer takes out (Green-Grocer being bank/broker/any intermediary), so the more you borrow the more commission the grocer gets.....well they are looking to put an end to that it seems, by introducing a cap on commission which the grocer gets, irrespective of the amount being borrowed....again our take is that The Central Bank are aiming to reduce the chance of a consumer being 'given' more of a loan than they need, which would mean that the grocer gets a bigger commission. Them days appear to be at an end.
Is Gerry Independent??
As you have heard, Gerry's store is called 'Gerry's Independent Stores'......however if you are looking at how he is getting paid and the bonuses he can make by selling more product from a certain provider etc, then you could argue that he is not independent!
If the Central Bank's recommendations come into force in full next year Gerry will have to remove 'independent' from his store name! The Central Bank appear to be very keen to ensure that only a grocer who is receiving no form of commission from a provider can class themselves as independent. Meaning if you go to an independent store once these recommendations come into force that you will have to pay out of your own pocket for the advice and recommendations. If they do state that they are not chargin you commission but that they are charging you a fee, which is being paid to them out of your products, via the provider, this will be classed as not being independent from the provider, and hence not independent in nature.
How Can I Get Independent Financial Advice in Ireland?
In simpler terms only a grocer who does not take commission of any sort, whose only income is the income he or she gets from charging a fee directly to the customer, will be able to call themselves independent under the new Central Bank recommendations. That is quite different to what is and isn't classed as independent in today's world of financial advice! If you think about it it makes lots of sense to only allow an advisor who is totally, financially and otherwise, independent of the product provider to be able to call themselves independent......
How Will This Impact On Us Getting Financial Advice?
Some are saying that it might reduce the number of financial advisors in the country. Others are saying that financial advisors who typically have lots of providers to choose from will reduce the number of providers to just 1, so as to remove the need to choose between different ones based on something other than the commission. Others say that it will open consumers eyes to the level of commissions that are being paid, and will disillusion them about financial advice altogether.
The last point, from our perspective would be a huge shame. The benefit of true financial advice and financial planning is usually way way beyond the cost associated with it. The avoidance of huge mistakes, the putting in place of plans which support your long term goals and lifestyle aims is worth so much more than the cost, again usually! We, for what it is worth, hope that the impact will be the rise of much more customer focused approaches from more and more of the industry. If that happens, and much like the investment markets nobody knows, then the recommendations will have been a rampant success.
We're hoping.
Thanks for reading.
Paddy Delaney
QFA | RPA | APA | Qualified Coach