Updated 03 December 2020
Usually it’s wise to remortgage every few years to ensure you’re on the best deal. This can often save you thousands over the whole mortgage term. But is it better to remortgage with the same lender or switch to a new mortgage provider? Here’s how to weigh up the pros and cons of this important decision.
Here are the main reasons why you might choose to remortgage with your current lender:
By sticking with the same lender, you may not need to pay a valuation fee and you may not need a solicitor, so you’ll save on those costs. You might also avoid paying a redemption fee.
Furthermore, if you’re remortgaging before your lock-in period ends, your current lender may also waive any early repayment charges (ERCs). These charges could be in the hundreds or thousands depending on the percentage of outstanding mortgage charged and years left on the mortgage term.
However, you might still have to pay an arrangement fee.
Your current lender already has your details on file, so the process should be quicker. A full remortgage with a new lender can take weeks or even months, but with your current lender it can take as little as a few days. However, if you’re asking to borrow more (an advance) your lender will need to do more checks, and this could take longer.
Your lender already has first-hand experience of your ability to repay loans, so probably won’t need to conduct a credit check on you (unless you’ve missed payments in the past). So you’re also more likely to have your application approved without a hitch.
Switching to a new provider can sometimes be better in the long run. Here are the main reasons why you might switch.
You might be offered a better mortgage rate by looking elsewhere. Furthermore, if you use a mortgage broker, then they may be able to find you a much better deal than your current lender can offer directly. There may also be additional offers available such as free legal fees and cashback. This is particularly worth considering if your circumstances have improved since your first mortgage application, as you may now have far more options. It's best to contact a mortgage broker who can help you find the best remortgage deal and assess your current situation to see if you could save some money by remortgaging.
First-time buyers have to take the best mortgage they can get – and very often this isn’t the best one around. In order to borrow what you need, you may have had to make all sorts of compromises – such as high arrangement fees, high redemption penalties and long lock-in periods (which keep you on the SVR after your deal expires). This is also a lot of extra information to think about. If you use a mortgage broker, they can take all these factors into account, so that your deal suits you in every way – not just in terms of interest rate – and next time remortgaging could be a lot easier.
Your current lender will probably base their valuation on what they assume your property is worth, and may not even visit it. But a more thorough valuation may show your house is now worth more. This may give you a better Loan to Value (LTV) and access to better mortgage rates. It’s particularly worth considering if you’ve had work done, or if the street you live in has become more desirable in recent years.
Remortgaging with the same lender is known as a product transfer. If the remortgage is a simple one you may not need a solicitor’s services. However, if you’re making changes (such as removing or adding someone to the mortgage) you’re more likely to need a solicitor or conveyancer.
The answer to the question ‘How much could I save?’ depends on a lot of factors: the deals available at the time, the fees you might have to pay, and whether you’re talking short-term or long-term. So it’s always worth discussing your situation first with a mortgage broker. A broker is unlikely to charge you anything just to assess your situation, and can help you weigh up the pros and cons of either sticking with your present lender, or choosing a new one. Find out about mortgage broker fees.
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