LETTING & ESTATE AGENT

Mortgage lenders: How to change if you're unhappy

Mortgage lenders: How to change if you're unhappy
Despite the amount of money involved, it's amazing how many homeowners allow years of their mortgage terms to pass without reviewing their deal.

And that could mean you are missing out on potentially huge savings by simply keeping things as they are.

Yes, life gets in the way sometimes.

But taking some time to look at your mortgage in more detail, before scanning the market for other deals, could really pay off.

If you're a landlord, switching can be even more beneficial and your income from letting your property could be boosted if your mortgage costs are lower.


Changing your mortgage lender

If your fixed mortgage term is coming to an end soon, it could be the right time to search for a new deal.

And as lenders rather enjoy securing customers from other lenders, there's a strong chance you'll find a better deal with a different company.

Once your fixed term ends, you'll automatically revert to the lender's Standard Variable Rate (SVR).

This could see your monthly payments increase.

Give yourself at least three months before your fixed term ends to explore deals with different lenders.

And take into account any potential charges or fees associated with moving, which could include:

  *  Early Repayment Charges (ERC) if you leave your existing mortgage before the end of any fixed term
  *  Valuation and legal fees with your new lender
  *  Possible exit fees with your current lender
  *  Booking or arrangement fees with your new lender


Compare mortgage lenders

As with any kind of loan or credit, securing a better deal often means spending some time shopping around.

A good place to start is price comparison websites, but speaking to a free-free independent mortgage broker with access to the whole market can also be beneficial.

Good reasons to switch mortgage lenders

1. Your fixed rate deal is about to end
Once your fixed term is up, your mortgage will move on to your lender's SVR.

This could mean an increase in your monthly payments.

Your lender should tell you when your fixed term is about to end, but it can be worth making a diary note to remind yourself to start shopping around in plenty of time.

2. Your loan-to-value is now lower
If you've had your mortgage for some time, there's a good chance that your payments and any capital growth in your home will have pushed your loan-to-value figure down.

Loan-to-value is the percentage of your property that is mortgaged and the higher that percentage, the less attractive your mortgage rate is likely to be.

However, even if you started your mortgage with an LTV of above 90%, capital growth and your payments could have brought this figure down.

And that means you could be able to secure a more attractive rate with a new lender - potentially saving you thousands of pounds.

3. You are on a variable rate mortgage and want to 'lock in'
While variable rate or tracker mortgages can keep payments low when interest rates remain low, economically uncertain times mean many mortgage holders yearn for the security of a fixed rate mortgage.

This provides you with the peace of mind that your monthly payments won't change for two, three, five or even 10 years in some cases.

4. Mortgage rates have reduced since yours started
Your mortgage rate might have been competitive 10 years ago, but if a high level of competition among lenders and suitable economic conditions prevail, rates can drop considerably.

Even if you are in the middle of a fixed term and facing an ERC, you can still sometimes be better off switching in the long term.

However, if you are thinking of switching while locked into a fixed term mortgage, ensure you seek independent advice to confirm you are making the right move.


Reasons to stay with your current lender

If your mortgage balance is small, it can be difficult to find a new lender.

An independent broker should be able to advise on the best way forward.

If you are in negative equity, meanwhile, where your property is worth less than the mortgage secured on it, it can also be difficult to find a mortgage company willing to lend to you.


How to change your mortgage lender (and things to consider)

After spending some time looking at the deals and lenders available to you, you might be ready to take the plunge and move to a new lender.

So, that can you expect and what do you need to consider?

Firstly, you probably remember the forensic examination your current lender performed on your finances when you took out your mortgage.

When you move to a new lender, they will want to be equally as certain that you meet their lending criteria and can afford the loan on your property.

So, be prepared to provide several months' payslips and bank statements, or accounts if you are self-employed.

A new lender will also want to know details of any debt you have, as well as your regular monthly outgoings to test affordability.

And remember, a new lender will also credit score you, so check your credit file before applying.

Switching lenders can usually be completed in four to eight weeks, but it can take longer.

Moreover, moving to a new lender will also take longer than switching to a new deal with your current lender, so weigh these timescales up against any costs and potential savings from switching.


Mortgage providers in the UK

The UK's big banks, Lloyds, RSB, HSBC and Barclays, are also the country's biggest mortgage lenders.

Specialist mortgage lenders are also available, which can help people with special circumstances.

One of the best ways to find a good mortgage deal that suits your individual needs can be through a mortgage broker, who will be able to access many lenders across the market.

Martin & Co's partner broker London & Country is a good place to start - they can serach the whole of the market for the best deal and won't charge a fee.