Is it better to switch mortgage lenders or remortgage? - Simmonds Mortgage Services

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Is it better to switch mortgage lenders or remortgage?

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    Taking a mortgage is a long-term commitment, but there are natural opportunities to review your product over the course of your mortgage term. A common question we receive from customers is, ‘Is it better to switch mortgage providers or remortgage?’ This blog will look at the pros and cons of each approach.

    Remortgaging with your existing lender means taking a new product with the same lender. This is called a rate switch or product transfer. An alternative is to take a new product with a different lender via a full remortgage.

    What are the reasons for switching mortgage providers?

    Borrowers are switching mortgage lenders for a variety of reasons. The most common reason for remortgaging is to move to a more competitive interest rate on a new product. When rates are rising, borrowers want to move from their lender’s standard variable rate to a fixed rate deal. However, some people remortgage to release capital, some remortgage when they move house, and some are looking for lower LTV borrowing to secure a better rate.

    Finally, many mortgage providers now offer more flexibility in repayments, so you can make overpayments without incurring any penalties. These are all valid reasons why you are considering changing mortgage providers.

    Will switching mortgage providers give me a better deal?

    Switching mortgages might get you a better deal, but there’s no guarantee that shopping around to change mortgage providers will make your mortgage more affordable and improve your financial circumstances. Check your new mortgage repayments carefully to make sure it’s the right move for you.

    The main advantages of using a new lender are:

    • You could get a lower mortgage rate
    • You could get better mortgage terms, such as a lower exit fee or increased loan to value at a better rate

    How do you switch mortgage providers?

    To switch mortgage lenders, you’ll need to find a new suitable product, have your mortgage application accepted and pay off your existing mortgage lender. This involves a full application, income checks, survey and legal work.

    What happens if I can’t change mortgage providers?

    If your financial circumstances have changed significantly since you took your existing product, you might find that you cannot move mortgage provider because you no longer meet the affordability criteria. In this situation, you will need to stay with your current lender.

    The same lender may be able to offer you a product transfer so you can take advantage of more favourable interest rates on other deals to reduce your monthly repayments.

    Why could remortgaging be a better option instead of switching to a new mortgage lender?

    When you are deciding if it’s worth switching mortgage providers, you must look at all the costs involved, not just the interest rate and the monthly mortgage payments. There are additional costs incurred when you switch mortgage providers.

    A new mortgage provider will usually charge mortgage arrangement fees, also known as a mortgage completion fee. There are likely to be legal fees, including a deeds release fee as well as valuation fees for the new product. You could also incur an early repayment charge or exit fees from your existing lender.

    Finally, you may also incur a fee from your mortgage broker to help you find the appropriate new deal. You can only make a decision on your new mortgage product when you consider all the switching costs.

    The advantages of staying with your current lender could include:

    • You can save money on valuation fees and arrangement fees
    • You may be more trusted by your existing lender, so you won’t have to worry about additional credit checks as you are a lower-risk
    • You can probably save time as it’s a relatively quick process to move product.

    How can Simmonds Mortgage Services help?

    Simmonds Mortgage Services has around 20 years of experience helping borrowers find a competitive deal when changing mortgages. From locating the best mortgage rates with your current provider and searching the market for a new lender to switch mortgages through to helping compile your legal paperwork, we’ll help you move your mortgage in up to eight weeks.

    To learn more about remortgaging, check out our blog.

    Frequently asked questions about choosing between remortgaging and switching mortgage lenders

    Can I remortgage to change my mortgage term?

    Yes, but you can sometimes also adjust your mortgage term with your current lender so you don’t have to move to a new lender incurring the added expense of moving products.

    When is it not a good idea to mortgage switch?

    If your early repayment charges are very high then it’s probably not good financial sense to move. If your property has decreased in value, you might be placed in a higher LTV bracket which would not give you access to the best fixed-rate deals. Finally, if your mortgage account outstanding is under £50,000, you probably won’t get much benefit from moving after taking into account all the costs.

    Do I need a solicitor to remortgage with the same lender?

    As you are transferring products and not purchasing a new home, you will not need a solicitor if you are staying with the same lender.

    Will I need a credit check if I am remortgaging with my existing lender?

    If you have kept up well with repayments on your current mortgage deal, it’s less likely that your provider will require a new credit check. This can be beneficial if you are worried that you might not pass the affordability checks if your income has reduced or your day-to-day expenses are higher.

    Do I need a mortgage broker to remortgage with my existing provider?

    No, you can approach your lender directly to transfer products. However, if you are looking at switching mortgage deals to improve your situation.

    Can I remortgage if I’m in a negative equity situation with my property?

    If your mortgage is worth more than your property, it’s unlikely you’ll be able to remortgage in these circumstances. You will need to wait until your property price has increased before you can remortgage with most lenders. However, it’s always worth talking to your provider who may be able to help you.

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    Andrew Simmonds

    Andrew Simmonds is the managing director at Simmonds Mortgage Services. He's been providing mortgage advice to home owners for many years.

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