If you’ve been on your current interest rate for a while it may be time to switch mortgage lender. Doing so could bring with it a number of benefits but just how easy is it to switch?
When should I switch mortgage lender?
There are a variety of reasons why someone would switch mortgage lender:
Your current deal is ending
If you’ve been locked into a fixed-rate deal but it’s now coming to an end, you may want to think about switching to another deal. In most cases, you’ll automatically move to your lender’s standard variable rate (SVR), but staying on this rate isn’t always wise. As the name suggests the SVR could go up and down depending on the Bank of England base rate. If interest rates go up, then consider how much your payments could rise by.
Your circumstances have changed
Does your mortgage still suit your needs? Perhaps your income has reduced or your family has grown. You want to make sure your mortgage stays affordable. If you’re on a variable rate, it could make more sense to move onto a fixed rate deal. You’ll know exactly how much you’re paying each month without the worry of any sudden fluctuations.
Or perhaps you’re aiming for a mortgage-free existence and want to pay off larger chunks of your loan. Switching to a more flexible mortgage may allow you to make regular over-payments without incurring penalties.
Interest rates have changed significantly
Mortgage lenders are always competing with each other, so it could be the deal that you originally took out may not be quite as good as what’s on the market today. If you switch mortgage lender, this could allow you to find a more competitive deal which could reduce your mortgage payments.
How do I go about switching lenders?
Firstly, you need to find out if switching from your current mortgage is actually possible. If you are in the middle of a fixed deal, you may face fees or penalties for switching your mortgage.
If you are free to do so, then start having a look at what other deals are on offer. There are literally hundreds, if not thousands of deals out there, so this can be hard work.
Take advantage of the services that a mortgage broker provides. A broker, with their expert knowledge of the market, will be able to search on your behalf. They’ll look for the best deal to suit your circumstances (and your budget). It can certainly make life a bit easier for you.
How much will it cost to switch mortgage lender?
Switching your mortgage will normally incur costs – but in the best case scenario, these costs will be negated by the savings you make by slashing your interest rate.
The costs you need to consider are:
Penalty fees from your current provider
Legal and valuation fees
Your new mortgage may come with an arrangement fee – this can be paid upfront or can sometimes be added onto your mortgage. However, the latter could be costly as you’ll be paying interest on this over the term of your mortgage.
Before making the switch to a different mortgage, always calculate the overall costs of the switch, and then work out any savings you will make over the term of your mortgage. If the savings outweigh the costs, then it’s definitely worth making the switch.
How long does the switching process take?
A straightforward deal can usually be completed in as little as four weeks, but complications can add time. Changing mortgages with the same lender should be very simple process but if you switch mortgage lender then bear in mind you’ll need to factor in the time it takes for the valuation and any legal work to be done.
If you are coming to the end of your current deal then make sure you start the process in plenty of time.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.