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Is it time to switch mortgage lenders?

Is it time to switch mortgage lenders?

Category: Mortgages

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Are you coming to the end of the contract with your current mortgage lender? Fed up with paying through the nose for those hefty monthly repayments? Perhaps you are looking for a large cash sum to fix that roof, add an extension, or fit a new kitchen or bathroom? By switching mortgage lenders you could save a small fortune in interest payments, reduce the term or get a more flexible mortgage with additional features like overpayments or payment holidays.

The remortgaging process has certainly become much easier. More and more mortgage lenders now offer specialist remortgaging services, often including free legal and arrangement fees as part of their deals. So if the deal with your current mortgage lender is coming to an end, or you need a large cash sum, has five top tips to guide you through the process of switching mortgage lenders.

  1. Check your current deal
    • It's important to check the terms and conditions in the small print of the contract you have with your current mortgage lender. Are there any redemption charges or exit fees?
    • Calculate how much you pay your lender every month, and how much it will cost you to leave your current mortgage. Now you are ready to look around for a lender better suited to your mortgage needs.
  2. Shop around and compare the best deals
    • Moneyfacts can compare over 10,000 mortgages for you from the comfort of your own home, all for free. Take the time to explore the market and you'll be one step closer to saving a small fortune.
  3. What your search will tell you
    • Your search will tell you the deal's interest rate (APR) as well as any initial rate and the period it lasts for.
    • It will also tell you how much you will have to pay your new mortgage lender each month, the true cost of the mortgage after five years and the total amount payable to the lender over the full term.
    • You can also organise search results to fit your circumstances. Perhaps you are looking for the cheapest monthly payments or the cheapest mortgage overall? If you are looking for a particular lender you have the ability to do that too.
  4. Compare with your current deal
    • Once you have found the deal for you, compare it with your current mortgage and how much it will cost you to switch - you may be surprised how much you could save each month. If the costs involved in staying with your current lender far outweigh the benefits of a new mortgage, it's time to say goodbye.
    • You'll need to get a redemption statement from your current lender to tell you how much you owe before you can apply for your new and improved mortgage deal.
  5. Apply Online
    • It's easy to apply through the Moneyfacts website. Just click through the relevant links and you'll be instantly directed to the mortgage lender's website to get their deal.
    • Once you've applied you'll need to complete the appropriate paperwork your chosen lender sends you.
    • Once this is completed, make a note in your diary to start the process again just before your new mortgage deal expires.

A word of warning - although remortgaging can be a sensible option for many borrowers, it may not suit everyone. If you only have a short period before your mortgage is paid off in full, or have a mortgage with large redemption penalties, the costs involved with remortgaging may outweigh the benefits. Also bear in mind if you are remortgaging to release equity, the debt is secured on your home, so if you don't keep up with repayments, you risk losing it.

So take the time to analyse your current mortgage carefully, and if you are paying over the odds, don't be afraid to switch lenders.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.