Switching to a new mortgage deal

When switching to a new mortgage deal, it is worth reviewing your options early. Early planning gives you time to compare mortgage rates and may help you avoid moving onto your lender’s Standard Variable Rate, or SVR.

You may be able to switch to a new deal with your current lender through a product transfer. Alternatively, you could remortgage to a new lender if another option looks more suitable.

The right route depends on your current deal, remaining mortgage balance, fees and property value. It should also fit your income, plans and what you feel comfortable paying each month.

---

Product transfer or remortgage?

When your current deal ends, you can usually either stay with your existing lender or remortgage to a new one.

With a remortgage, you may need to provide payslips, bank statements, ID and details of your income and spending.

When should you start looking?

Review your options before your current deal ends so you have time to compare what is available.

Many lenders allow you to secure a new deal around three to six months before your existing rate finishes. Starting early gives you more time to compare options. It may also reduce the risk of moving onto the lender’s SVR, which is often higher than fixed or tracker deals.

However, switching too early can be expensive. If you leave your current deal before the end of a fixed or discounted period, your lender may charge an early repayment charge.

Before making a decision, check your mortgage offer, online account or annual statement. Look for your deal end date, any early repayment charge and any product or exit fees.

How to decide if switching is worth it

Look beyond the headline rate when comparing a new mortgage deal.

Start by comparing your current mortgage payment with the payment available on a new deal. Then check how your payment could change if you moved onto the lender’s Standard Variable Rate.

Fees can also affect the total cost. A lower rate does not always mean a cheaper deal, especially if the product fee is high. The saving may be smaller if your mortgage balance is lower or the deal period is short.

Example: comparing savings and fees

A new deal may reduce your mortgage payments by £120 a month.

Across a two-year deal period, that monthly reduction would total £2,880 before fees and charges. However, once you include a £999 product fee and other charges, the overall saving may be lower.

The best option depends on your mortgage balance, rate, term and how long you expect to stay in the property. Mortgage calculators can help you compare different rates, fees and monthly payments before you decide.

Costs to check before switching

Switching mortgage deals can involve fees, so it is worth checking the full cost before choosing a new rate.

A product transfer with your current lender may cost less than a full remortgage. However, some deals still include mortgage product or arrangement fees. Those fees can affect the total cost, even when the headline rate looks attractive.

A remortgage to a new lender can involve more checks and extra costs. Before choosing a deal, check whether you need to budget for:

• product or arrangement fees
• valuation fees
• legal work
• early repayment charges
• exit or account closure fees
• advice or broker fees, where applicable

Some lenders include valuation or legal packages on selected remortgage deals. However, you should still compare the rate, mortgage term, fees and total cost before choosing.

You should also check whether you would pay any fees upfront or add them to the mortgage. Adding fees to the loan may lower the upfront cost, but you could pay interest on those fees over time.

What to check before switching

Before switching, check how the process, timing and lender checks could affect your plans.

For a product transfer, your lender may let you choose a new deal online, by phone or through an adviser. If accepted, the new rate usually starts when your current deal ends.

For a remortgage, you usually apply to a new lender, provide documents and wait for a mortgage offer. The lender will normally review your application and arrange a valuation. A solicitor or conveyancer may then repay the old lender and set up the new mortgage.

A new lender will usually complete an affordability check. The check looks at your income, outgoings, debts, credit history, mortgage amount, property value and loan to value, or LTV.

Start reviewing your options before your current deal ends. Alongside the rate, compare the mortgage term, future flexibility and any checks that could affect your application.

When switching may not be right

A new deal may not suit every homeowner or every set of plans.

If you plan to move home or buy a home soon, take care before locking into a new deal. Sale timings and estate agents’ fees can affect the cost of moving. Early repayment charges and porting rules can also affect whether switching now makes sense.

A switch may be less suitable if you have a small mortgage balance, as fees could reduce or remove any saving. It may also be harder if your income has changed, your credit position has worsened, or your property value has fallen.

Some homeowners may already have a competitive deal. Others may decide to wait if switching now would mean paying a large early repayment charge.

For these reasons, it helps to compare the full picture before making a decision.

How Muttuo Mortgages can help

Switching to a new mortgage deal can feel simple at first, but the best route depends on more than the interest rate.

Muttuo Mortgages can help you:

Muttuo offers whole-of-market remortgage advice. We can help you compare staying with your current lender against moving to a new one.