When you come to the end of your existing deal with your current lender, it makes financial sense to look at what rates options you have in order to ensure you have the best deal available to you, and this could save you money over the whole mortgage term. If you do nothing you will normally revert to the mortgage lender’s standard variable rate, which may be a much higher interest rate than what remortgage deals are available.
But should you stay with your existing lender or switch mortgage provider?
Firstly lets see the difference between the two:
With a remortgage, you would be looking to find a new mortgage deal with a new mortgage provider and will go through the full application process. There may be fees you need to pay like valuation fees and legal fees. Most lenders do offer incentives such free mortgage valuations and legal fees, or cash back.
The new lender carry out a credit check, and property valuation to ensure the property meets their criteria. You will be asked to provide the new mortgage provider with all documents to support the application, and they will look at other debts in the background to ensure the mortgage meets their affordability criteria.
A rate switch is when you stay with your current lender and switch to a new rate with them. There is no legal paperwork to be completed and the rate will switch at the end of your existing mortgage deal with the same lender.
If you do switch to a new lender, always ensure that the completion of the mortgage is on or after any early repayment charge is payable on your existing mortgage deal and check for any exit fees or other costs involved that you may need to pay.
What are the advantages of doing a rate switch with your current lender?
1. You could save money
By staying with the same lender, you will normally not have any valuation or legal costs, so you’ll save on those costs. You might also avoid paying redemption/ exit fees.
If you do the rate switch before your current mortgage rate ends, and the new rate is lower than the existing rate, some lenders may also waive any early repayment charges (ERCs) and allow the switch to be done prior to the end date of the current deal.
However, you might still have to pay arrangement fees depending on the rate options.
2. You could save time
Your current lender already has your details on file, so the process should be quicker. There is normally no additional underwriting or credit check, except if you want to borrow more money, and the rate can normally be secured and mortgage offer issued within a few days. With a remortgage to a new lender, the mortgage process can be longer.
3. Change in Circumstances
Your current mortgage lender will have a track record of your mortgage and your payment history, so even if your financial circumstances have changed since taking out the initial mortgage, it should not impact your ability to do a rate switch.
What are the benefits of remortgaging with a new provider?
Remortgaging to a new mortgage lender can sometimes be more beneficial . Here are the main reasons why you might switch from your current provider.
1. You could get a better rate
You might be offered better deal for your mortgage by other mortgage lenders. Getting the right advice from a qualified mortgage broker can be invaluable and they have access to all mortgage interest rates available. They can compare the mortgage deals offered by your existing lender and other lenders to ensure you are getting the best deal for you based on your circumstances.
2. You could get better terms
If your property value has increased, or your mortgage amount has reduced since your existing mortgage was taken out or your income has increased, you may be able to get a lower interest rate. This may also be useful, if you want to increase your loan amount for home improvements, or repay debts for example.
3. You may get a more up-to-date valuation
If you stay with your current lender and do a rate switch, they will probably use an indexed valuation to confirm the value of your property. This can sometimes be lower than the market valuation.
When you remortgage with a new lender, they will carry out a valuation and this may give you a better Loan to Value (LTV) and access to better mortgage rates.
4. Borrowing more money
You may want to borrow more money on your mortgage for home improvements or to buy an additional property for example, and your existing lender may not either allow this or is unable to lend you the amount you require. Switching mortgage providers may be a better option in this case.
WHICH IS BETTER FOR ME – SAME LENDER OR NEW LENDER?
This depends on many things – what deals mortgage providers have available at the time, what fees and costs you will need to pay for both scenarios, overall cost, mortgage payments and your personal circumstances at the time of applying.
Speak to a mortgage broker to get a full understanding of your options and best mortgage deals available to you.
You may need to pay a broker fee for the advice so you will need to allocate for this also.