Homeowners Save €91,440 by Switching Mortgages for Renovations

As the demand for larger family homes continues to outpace supply, many homeowners are turning to renovations as a viable alternative. This shift in behaviour has prompted financial experts to suggest that switching mortgage lenders could yield significant savings. By opting for a lower interest rate when refinancing, homeowners may keep their repayments consistent while enhancing their living spaces.

At the end of September, there were just 13,000 homes available for purchase in Ireland, according to data from MyHome.ie. As a result, the number of mortgage approvals for home movers has dropped significantly, with fewer than one in five approvals in the past year resulting in actual purchases, as reported by the Banking and Payments Federation Ireland (BPFI). Meanwhile, the trend for mortgage top-ups has surged, with drawdowns increasing by 13.4 percent compared to the previous year.

Choosing to top up existing mortgages for renovations may inadvertently lead homeowners to overlook the potential benefits of switching lenders. Martina Hennessy from doddl.ie emphasizes that many homeowners are missing out on substantial long-term savings by sticking with their current banks without exploring market rates.

“People are realising they can refinance, free up funds for renovations, and lower their repayments all at once,” Hennessy stated. This perspective is echoed by Rory Doyle, a mortgage underwriter at Nua Money, who notes that rising property values have improved loan-to-value ratios for many homeowners. These more favourable ratios put them in a strong position to secure better rates or access additional equity.

According to BPFI data, there was a 35 percent increase in remortgage and switching activity in the third quarter of this year. Homeowners are becoming increasingly proactive about seeking better mortgage deals, indicating a shift in mindset towards mortgage management.

For example, Hennessy explains a scenario in which a homeowner releases €50,000 in equity to renovate, bringing their mortgage total to €300,000. By switching to a lower variable rate of 3.09 percent, rather than remaining at a 4.5 percent rate with a major bank, the borrower could save an estimated €91,440 over a 30-year period.

Sean Corbett, director of SYS Mortgages, points out that the application process for a top-up mortgage is similar whether homeowners stay with their existing lender or switch. While remaining with the current bank may avoid legal costs, which can reach €1,500, switching could result in much greater savings in the long run.

Homeowners seeking to renovate will need to provide extensive documentation, including six months of bank statements and proof of income. Corbett shares the story of a client planning a significant energy upgrade. The client switched from a 4.4 percent rate to 3.2 percent with Bank of Ireland, demonstrating the financial benefits of switching lenders.

Those undertaking energy-efficient renovations can also qualify for lower “green” mortgage rates if they secure a declaration from an engineer confirming an improved building energy rating post-renovation. This strategy allows homeowners to manage their repayments effectively while enhancing the value and comfort of their homes.

While extending the mortgage term can make monthly repayments more manageable, it often leads to increased total interest payments over time. Corbett notes that many clients aged between 40 and 55 typically increase their mortgage terms when undertaking substantial renovations.

Bank policies regarding home improvement loans vary widely. Some are willing to finance up to 90 percent of a property’s value, while others might only lend for documented structural improvements. For larger renovations, banks may require a valuation to assess the property’s new value before releasing final funds.

For minor renovations, personal loans can be a suitable alternative, as reflected in the BPFI report that noted a 10.3 percent increase in home improvement loans in the second quarter of 2025. The average amount for these loans was around €12,823.

As interest rates are expected to rise, homeowners are encouraged to act swiftly to take advantage of lower loan-to-value ratios and secure the best possible rates for their renovations. Complacency now could lead to higher costs in the future for those looking to enhance their living spaces.