Switching from a subprime mortgage
Can you switch from a subprime mortgage to a better rate?
Yes, you may be able to switch from a subprime mortgage to a better rate if your financial situation has improved. In most cases, lenders focus on your overall financial position, such as your credit history, income and ability to repay the loan. When switching, eligibility is assessed by the lender based on your circumstances, rather than strictly on standard loan‑to‑value limits that apply to new mortgages.
Switching involves a new application, including affordability checks and a property valuation, and there may be costs such as legal, valuation or fixed‑rate break fees. Comparing total costs and potential savings using the CCPC Mortgage comparison tool and Mortgage calculator can help you decide if switching is worthwhile, and free advice is available from the Money Advice and Budgeting Service (MABS) if you’re unsure.
Your switching options can differ depending on whether your mortgage is for a principal dwelling home (PDH) or a buy‑to‑let (BTL) property.
What's involved when switching from a subprime mortgage?
While the process is called a “switch”, it follows the same steps as a fresh mortgage application. Your home will usually be revalued to confirm the LTV ratio, and affordability tests will apply. Switching can take a few weeks, and some lenders offer cashback incentives – for more on that, read on. Apply to multiple lenders and compare rates carefully.
These requirements may be applied differently for PDH and BTL mortgages, depending on the lender.
What if you’re in negative equity?
Negative equity happens when falling property values mean your mortgage is bigger than your home’s value. For principal dwelling home (PDH) mortgages, switching is usually not possible until your home’s value improves. Check the Central Bank's Loan-to-value limits.
Do you need a mortgage broker?
You can apply directly or use a broker for advice. Always check the broker is regulated by the Central Bank of Ireland.
Lender checks
Lenders will carry out full checks, just like when you first applied for a mortgage.
What lenders will check:
- Your income (stable and sufficient)
- Your credit history
- Your repayment record on loans and credit cards
Documents you’ll need:
- A salary certificate (sometimes called an employer’s certificate)
- Proof of income (usually three months of payslips)
- Employment Details Summary – formerly P60 – from Revenue
- Photo ID (passport or driver’s licence)
- Proof of address
- Recent bank statements (usually six months for a switch)
Additional factors lenders look for:
- Regular savings habits: Consistent deposits into a savings account
- Positive current account behaviour: No frequent overdrafts or unpaid fees
- Cushion or financial buffer: Extra funds left after bills are paid
- Stable employment: Permanent or long-term contract preferred
- Low debt-to-income ratio: Manageable level of other loans or credit card debt
- No recent missed payments: On loans, credit cards or utilities
- Evidence of budgeting: Ability to manage money without strain
If you’re self-employed or a contractor:
- 2 to 3 years of audited accounts or tax returns
- Proof of ongoing contracts or regular work
- Business bank statements
- Up-to-date Revenue documentation (e.g., Tax clearance certificate and Form 11)
- Sometimes an accountant’s reference
Important:
If you are switching your mortgage (moving to a new lender or product), the Central Bank’s loan‑to‑value (LTV) and loan‑to‑income (LTI) limits do not apply in the same way as they do for new mortgages.
This does not guarantee that you will be able to switch. You will still need to meet the new lender’s requirements, including affordability checks, credit assessment and any other criteria they apply. As a result, you may be able to switch even if you do not meet the usual LTV or LTI limits for new borrowers.
Note
Your options depend on whether your mortgage is for:
- A principal dwelling home (PDH) – the home you live in. LTV limits, exemptions and switching options may apply differently.
- A buy‑to‑let (BTL) property – a property you rent out. Lenders often apply stricter criteria, and switching options may be more limited.
Different rules apply for buy-to-let (BTL) mortgages compared to principal dwelling homes (PDH). For more details, see the Central Bank’s Mortgage Measures.
If you have a subprime BTL mortgage, switching can be more difficult, as some lenders have a more limited appetite for BTL switchers and may apply stricter loan‑to‑value and affordability rules.
What if you’re not eligible to switch yet?
Continue making repayments, pay off other debts and save regularly. Once your credit history and financial situation improve, check for lower-rate mortgage options using the CCPC Mortgage comparison tool.
Your right to information
Under the Central Bank of Ireland’s Consumer Protection Code – Provision 169, lenders must provide personal consumers with information about mortgage switching options when appropriate. This includes explaining whether switching may be an option for you and what steps would be involved.
What costs are involved in switching?
Switching providers may involve legal costs, valuation fees and early payment fees if you’re on a fixed rate. If you’re on a variable rate, you can usually switch without an early repayment charge, but other costs may still apply. Switching to a lower-rate mortgage could save you money in the long term. Use the CCPC Mortgage calculator to estimate your savings.
Cashback offers
Many lenders offer incentives such as cashbacks, but it is important to look beyond the headline offer and check the long‑term cost.
Mortgage cashback usually comes in two forms:
- Lump‑sum cashback is a one‑off payment you get at the start of your mortgage, often used to help with upfront costs.
- Ongoing cashback is paid monthly as a small percentage of your mortgage for a set number of years.
A lower interest rate can be better value than cashback, but this is not always the case. For a short fixed‑rate period, the cash you receive up front may sometimes work out better. Before accepting any incentive like cashback, you should always:
- Calculate the total cost over the full mortgage term, and
- Calculate the cost over the fixed‑rate period
What you are choosing between
When choosing a mortgage, you may find yourself comparing:
- A lower interest rate with no cashback: Your monthly repayments will be lower, or
- A higher interest rate with cashback: You get money up front, but your monthly repayments will be higher.
However, these are not always your only options. Some mortgages offer competitive interest rates while also including cashback. Choose the option that leaves you better off overall by comparing total repayments over the fixed‑rate period with the value of the cashback.
Simple check:
(Higher monthly repayment − lower monthly repayment) × number of months in the fixed‑rate period = extra cost
Compare this extra cost with the cashback:
- If the extra cost is more than the cashback, the cashback deal may not be worth it
- If the cashback is more than the extra cost, you may be better off overall with the cashback option
You can use the CCPC mortgage comparison tool to see what cashback incentives are available. If you are unsure, speak to your mortgage provider or a mortgage broker to get a clearer picture of which option best suits your situation.
What to keep in mind
In Ireland, most lenders offer fixed-rate mortgages for relatively short terms (usually between three and seven years). After that period ends, you’ll need to decide whether to take out a new fixed-rate deal – based current Irish market interest rates – or switch to a different lender offering a more competitive rate.If you’re struggling with debt
Go to the CCPC Debt action plan for the steps to follow in order to better manage your debt.
If you need debt management advice:
Contact MABS – the Money Advice and Budgeting Service for free, confidential advice. MABS supports people who are worried about their mortgage or other debts. Their advisers can:
- Help you review your finances and create a realistic budget
- Explain your options if you’re behind on mortgage payments or in negative equity
- Negotiate with your lender or creditors on your behalf
- Advise you on government supports, including the Abhaile scheme, which provides free financial and legal advice for people in serious mortgage arrears
- Refer you to a Personal Insolvency Practitioner or solicitor if needed, at no cost
- Support you through the Mortgage Arrears Resolution Process (MARP) and help you find the best solution to keep your home if possible.
