How Do I Switch Mortgages?
Switching mortgages is the process of switching from your current mortgage to a better mortgage deal for you and your property. There are a few steps to switching mortgages to a new deal; following these steps can make the process of switching more straightforward, helping to ensure you make the best possible move in your financial management of your property.
There are many reasons why people need to switch their mortgage deal. Understanding when to consider switching your current mortgage deal can be just as important as learning how to go through the process in the first place. There are, as with all first and second mortgages, key factors to acknowledge when considering changing mortgages.
Switching Mortgages Explained
Before getting into how to go about the process which will allow you to switch mortgages, it is important to understand what switching your mortgage means. Switching mortgages, or ‘remortgaging,’ is a process by which a homeowner switches their current mortgage arrangement for another. This is typically done to exchange a current mortgage plan for a cheaper deal; however, this is not the only valid reason to consider switching.
If your current deal is coming to an end and you are exiting the period during which you would incur early repayment charges for the mortgage; once the term is officially over, your provider will likely automatically switch you to a Standard Variable Rate (SVR) Mortgage. This type of mortgage deal typically comes with the highest levels of interest rates when compared to the likes of tracker and fixed rate mortgages.
Switching your mortgage to a new one before your lender switches the home loan to a Standard Variable Rate Mortgage can help cut the costs of your mortgage repayments significantly.
Is It Worth Changing Mortgage Providers?
Switching mortgages is a process and there are various steps to take in order to switch properly and effectively. Below is a chronological list of the main steps to take when looking to switch mortgages. Following these six steps can help to ensure you get the best switch on your mortgage deal:
Consider why you want to switch – In order to get the most out of remortgaging, you must first consider why you actually want to switch and whether this is a valid reason for switching.
Discuss your reasons with a mortgage adviser – To make sure that your reasons for switching mortgages are valid, you should speak to an independent mortgage advisor. A mortgage advisor can help to give you professional advice on your options and help you to discover the best course of action to take.
Explore options for switching with your current provider – After exploring the best mortgage deals to switch to, it is always good to check with your current provider to see if they can match the best deals or offer something better. You will have an existing relationship of sorts with your current lender. Thus, your current provider may be competitive and seek to keep your business with them. This means you could end up with an even better rate to switch to by staying with your current lender if you approach it properly.
Evaluate the best options for your circumstances – After exploring the different deals on the market and speaking to your current provider about matching the best deals, it is then time to evaluate the best options for you and your current financial situation. Taking time and care during this evaluation process can ensure you end up switching to the best deal possible out of those explored.
Speak to a solicitor – Those who are remortgaging will more often than not require a solicitor to manage the legalities of switching mortgage deals.
Make an application for your preferred new mortgage deal – once all the above steps have been taken, all that is left to do is to fill out the application for your desired new mortgage deal. Before sending off an application for a new deal, you should first check that you meet all the criteria needed for success in the application (e.g. having a certain credit rating or annual income).
When Should I Consider Switching Mortgages?
With so many different reasons to start considering remortgaging, for example to save money or if your current deal is over. Additionally, Brexit has become another interesting new reason that has surfaced in the remortgaging sector. With the uncertainty of Brexit, many homeowners in the UK have started to hunt for better deals on their mortgage whilst there is certainty that such deals are still out there.
Although this is a current trend in the UK, this should, as with all mortgage-related decisions, be approached with careful consideration and only followed through when you are confident that this will improve your financial situation rather than damage it.
Remortgaging With Better Loan-to-Value
Another reason to consider switching would be if you own more equity in the property than when you initially took out the mortgage. In such cases, remortgaging can lead to lower LTV (loan-to-value) and therefore a better rate on your monthly repayments. This is only typically effective once you own over a certain percentage of the property, usually around 30%, compared to the initial 10% deposit that was paid during the start of your mortgage term.