This e-mail came through to the ValueIreland.com inbox recently – pretty topical given some of the recent posts. I think it’s a common question for many people at the moment given the drastic drop in interest rates.
Hi Do not know whether you can help. We have a fixed rate mortgage with KBCHomeloans. It is a three year fixed rate due to last until july 2010. I made enquiries about changing to a variable rate with a lower rate of interest. I was told it would cost 9,000 to change over to a variable rate.Is this correct? We have an outstanding balance of approx 300,000 mortgage loan with them.
It is standard practice for banks to charge if you try to break from a fixed rate mortgage early. You’ve signed a contract with them to pay them a certain amount of money over a certain period of time and in exchange, they gave you a mortgages.
So, trying to change to a variable rate mortgage means you’re breaking the terms of the signed contract and therefore, the bank needs to recoup the money they’d lose by letting you change to a variable rate mortgage.
The first thing to check is the details of the original mortgage contract you’ve signed to see what the charge was detailed as in there.
If it’s €9,000 or some fixed percentage, then you’re pretty much tied in and have to pay the asking amount. Alternatively, if it’s not specifically defined what the charge should be, then you might have a better chance negotiating the cancellation fee and getting the €9000 cut to a lesser amount.