A mortgage is almost certainly the biggest loan you’ll ever take out in your life, which makes the rate of interest you pay on it of crucial importance. In some cases, it could make the difference of thousands of pounds a year.
Ensuring you are on the lowest mortgage rate possible for your circumstances almost always involves switching mortgages – and in many cases lenders too.
Here’s what you need to know about switching mortgage providers.
What’s the term for switching mortgage provider?
Switching lenders – for example, from Santander to HSBC, or from Barclays to Leeds Building Society – is officially known as remortgaging.
This is not to be confused with a ‘product transfer’ which refers to staying with your existing lender and switching mortgage deals.
In either case, if you want to top up your loan during the process of switching mortgages, you’ll need to apply for a ‘further advance’.
When can you switch mortgage provider?
To avoid paying your lender’s standard variable rate (SVR), you should aim to switch mortgage provider – or even just mortgage deals – as soon as your current offer ends.
This is likely to be either two or five (or in some cases, 10) years from its start date.
The standard variable rate is a lender’s own central rate of interest. It is usually considerably more expensive than any new mortgage deal, either from that lender or any one of its competitors.
However, as SVRs do not come with tie-ins, you will be free to leave the deal at any time penalty-free.
You can usually apply for a new mortgage up to six months in advance from the date you need it to take effect.
Once the offer has been issued it will come with a completion deadline. These vary but the maximum will be six months.
How can I get prepared to switch mortgage provider?
The digital age has made the process of switching mortgages more seamless than ever. But it still pays to get virtual paperwork organised in advance – for example, bank statements, payslips, scans of your passport and employment contracts.
For your partner too if you are buying together.
It’s also a good idea to check your credit score before you apply to switch mortgage providers. This will give you a chance to rectify any potentially nasty surprises ahead of the new mortgage provider’s search of your report.
How do I switch mortgage provider?
Here’s what to expect from the process of switching your mortgage from one provider to another:
- Between three and six months before your current mortgage offer expires, get in touch with an independent mortgage broker such as our partners, London and Country or Fluent. Both are free-of-charge and will provide you with mortgage options from across the whole market
- Alternatively, you can do your own research and compare the latest remortgage deals at MoneySuperMarket
- Once you have identified the deal you want to go for, make your application either via your broker or direct to the chosen lender. This is where you will need your paperwork, as outlined above
- Your new lender will carry out a valuation, either by sending a valuer in person or by a remote ‘desktop’ valuation. This is to check the property is sufficient security for the loan you are applying for. Many remortgage deals come with free valuations, but some can cost up to a few hundred pounds
- If everything stacks up, a mortgage offer will be issued, which you will need to sign and return. This will be valid for between three to six months, depending on the lender
- Now the legal work is carried out, typically by a solicitor that works with the new lender. Many remortgage deals come with free basic legal work – or cashback to pay for it – as part of the deal. However, if the legal work is more complex – involving a transfer of equity or a problem with the leasehold, for example – you may be charged the additional cost
- A completion date for when the old mortgage closes and the new one opens will be arranged. Always double-check that the start date of your new mortgage is outside of any tie-ins with your current deal. If your new mortgage completes too early, even by a day, and tie-ins still apply, you could be hit with expensive early repayment charges
- On completion, your new lender will draw down the funds and pay off your old lender. Your debt is now with the new mortgage provider
- If your old lender applied a mortgage account fee when you took the loan, which you opted to defer, you may be charged this fee when the mortgage closes. It’s usually in the region of £200
- Your next monthly mortgage payment will then be to your new lender – this will be by direct debit which you will have previously set up
Will I be able to switch mortgage provider?
When you remortgage to a different lender, your affordability for the loan will be assessed from scratch, in addition to the standard credit and ID checks being carried out.
If your circumstances or income/outgoings have changed since when you qualified for your current mortgage – for example, you’ve been furloughed, become self-employed or had a child – your application may not stack up with a new lender.
In this case, your best bet is to find out what your current lender can offer – so long as you have built up a history of reliable payments, affordability checks can be less rigorous.
It’s likely that any deal your current lender can offer you will be cheaper than dropping onto its SVR.
When should I stick with the same mortgage provider?
If your mortgage is very small and you want to retain flexibility, say to pay it off early, it could make sense to stick with your current mortgage provider, even it means paying its SVR.
This is because the higher interest rate will have less of an impact on your monthly repayments and SVR mortgages do not come with tie-ins, so you are free to redeem it at any time penalty-free.
Is it worth switching mortgage provider?
There is a fair amount of paperwork involved in switching mortgage lenders – although much is now digital – but it’s usually more than worth it for the money you save in interest.
If you use a mortgage broker, such as our partners London & Country or Fluent, much of the legwork is carried out for you.
Compare remortgaging deals
If you’re looking to switch mortgage provider, comparing remortgage deals with MoneySuperMarket is a good place to start.
All you need to do is provide us with a few details about yourself, your home and your current deal, and we’ll show you what’s out there.