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Guide to switching mortgage provider

Guide to switching mortgage provider

When you switch from one mortgage deal to another, it’s known as remortgaging. You can remortgage your property with the same provider or a different one – you’re not moving home and your new mortgage will still be secured against your existing property. Read our guide on what you need to know if you switch mortgage provider… 

Tobi Owens
From the Mortgages team
minute read
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Posted 29 JULY 2020

Why might you want to switch mortgage provider?

There are a few reasons why you might want to switch mortgage provider, such as to find a better deal, your current deal is coming to an end or to release equity, or there could be restrictions on your mortgage that you’re trying to move away from.

Your fixed term deal has come to an end
Your current deal could be coming to an end. Most fixed-rate mortgages last between two to five years. At the end of the fixed-rate period your interest rate typically reverts to the lender’s standard variable rate (SVR). Variable rates tend to be higher than fixed rates, which is why it’s a good idea to move to a new deal when your fixed rate mortgage comes to an end.

You want to overpay on your mortgage
If you’d like to overpay on your mortgage, you may find that your current mortgage deal will penalise you for making an overpayment. So, if you’d like the option to overpay on your mortgage, you may need to find a new deal. If you’ve recently been given a pay rise, or have come into some money through an inheritance, you may wish to use that extra money to help pay off your mortgage. This can save you thousands in interest over the rest of your mortgage term.

However, be aware that if you’re currently locked into a fixed-term mortgage deal, you’ll usually face an early repayment charge for leaving your current deal. Therefore, you should weigh up the potential saving against the cost of switching. In this instance, it’s best to switch if you’re coming to the end of a fixed-term deal, or are already on a standard variable rate, in which case, you’re free to switch.

You’re eligible for a more competitive mortgage tier
If the loan-to-value between your mortgage and home has decreased over time, either through continued payments being made or the value of your home increasing, you may find that you’re eligible for the next band in competitive mortgage rates.

What are the benefits of switching mortgage provider?

You can find a more competitive deal
If your current deal isn’t competitive, you might want to find a better interest rate. Or perhaps you want to overpay to clear your mortgage quicker and your current lender won’t let you do this without paying a hefty penalty.

Get access to a sum of money
You may want to remortgage to get access to a sum of money. You do this by releasing equity (the share of your home that you own outright).

Your equity includes your initial deposit, the amount of your mortgage that you’ve already paid off and any increase in the value of the property. If the property has fallen in value, your equity will be reduced. If the value falls below the amount of your mortgage, you’re in what’s known as ‘negative equity’, so remortgaging to release funds is not an option.

Am I eligible for a new mortgage deal?

When you remortgage your property, the mortgage provider will carry out an assessment of your financial circumstances, which will include an affordability and credit check.

It may be harder to get a deal if your financial circumstances have changed: for example, your employment status is different, you’re on a lower income or there’s been a significant increase in your monthly outgoings.

You can also use our mortgage calculator to help you find out how much you may be able to borrow.

What are the fees when remortgaging?

When you remortgage your home, you might be charged an exit fee on your existing deal if it hasn’t come to the end of its term. Plus, you’ll typically have to pay arrangement fees on a new mortgage, as well as solicitor’s fees. You should take these into account when deciding whether remortgaging makes sense.

How long does switching mortgage lenders take?

You can typically expect the mortgage switching process to take around one to two months. This may be longer, depending on any complications surrounding your existing mortgage. You’ll also need to complete a more thorough application process than switching with the same provider.

If you’re switching mortgages with the same provider, you can usually expect it to take less time.

What are the benefits of sticking with the same mortgage provider?

You don’t have to change mortgage lender if you want to remortgage, you can simply switch deals with your current provider. This could mean you have less paperwork to complete, as your lender already has your information, and you may have to pay out less in fees.

If you’re locked in a fixed-rate mortgage for a specific term, you’ll also need to consider any penalty fees for ending your agreement early. If the penalty for leaving your existing supplier is greater than your potential saving, you’re likely better off staying with the same provider.

Compare mortgages

Mortgages are complex financial products, so it’s important to take your time to find the right deal, when looking to switch mortgage providers.

You can do this by starting a mortgage comparison.

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