With mortgage interest rates going up, we’re all wondering how we can get the best mortgage deal to keep our mortgage payments as low as possible.
Often, the first place to start is to look at remortgaging with your current lender, as this often saves time, admin and fees. But remortgaging with a different lender may give you better options.
The principle of remortgaging - finding a new mortgage product - is to ensure you’re always getting the right mortgage product for your personal circumstances. This could mean finding a better interest rate, more flexible mortgage terms, or borrowing more more.
What happens when remortgaging with the same lender?
To remortgage with the same lender, you’ll do something called a rate switch or product switch, depending on what’s changing with your mortgage.
In the first instance, you can look online at your mortgage account which should give you available product switches. Or contact your lender before your existing mortgage deal expires to find out what they could offer you going forwards.
Benefits of remortgaging with the same lender
Cheaper fees
Generally (though not always), you’ll pay less fees as you are able to avoid legal costs and valuation fees. This typically is thousands of pounds. A rate switch or product transfer may not cost anything.
Easier process
As you are not purchasing a new property, your current lender ought to have your details to hand from your original application, so the application process should be fairly easy. It is just a simple swap of mortgage products.
No credit checks or proof of inco
Your current lender won’t ask for wage slips or any documentation. As long as you’ve been making your existing mortgage repayments and are not in arrears, they shouldn’t ask for further proof of income.
This could be beneficial if your salary has changed, and you can’t remortgage elsewhere due to affordability issues.
Always make sure that you’ve checked you can still afford a similar mortgage with your current lender if they do not do additional financial checks.
The onus falls on you to be responsible.
Faster
While you should still take your time remortgaging, a simple product transfer could be processed the same day, whereas remortgaging with a new lender could take up to 12 weeks due to credit checks, an affordability check, the property valuation and legal work.
Disadvantages of remortgaging with the same lender
Restricted to one lender
Limiting yourself to just one lender means you may potentially be missing out on better deals available out there in the mortgage market from other lenders.
By all means, find out what your current lender will offer for remortgaging with them. But use that as a ballpark to then shop around. My preferred whole of market mortgage broker is Habito, if you need somebody impartial to talk to about remortgaging.
May not be best for your circumstances
Your current lender may encourage you to stick with them because they don’t want to lose your business. So, while you think you’ve been given a good deal, the lender may have not had your best interests at heart.
May miss out on a lower LTV
If you remortgage with the same lender, they probably won't perform an up-to-date valuation of your property. If you’ve built up equity in the property through a combination of the market rising and paying off existing mortgage, you may get a better interest rate with a new provider, and a new valuation, thanks to a lower loan-to-value.
Can you remortgage during a fixed term?
Yes, it’s possible to remortgage during a fixed term. But the main thing to consider is early repayment charges. Which could effectively wipe out any benefit of remortgaging to a better deal.
When you get a fixed term or fixed rate mortgage, you can generally make yearly overpayments of up to 10% of the value of the mortgage. So, if your mortgage is £200,000, then on top of your standard monthly repayments, you could pay £20,000 off extra each year without incurring any charges.
Anything above this will be subject to early repayment charges of between 1-5% depending on how early you make those overpayments.
So, remortgaging during a fixed term with a large mortgage could cost you thousands of pounds in early repayment fees.
If you need the flexibility of remortgaging early during a fixed term, you might want to consider a tracker mortgage that comes with no early repayment charges. They are not that common, but a few lenders do offer them.
How early can I remortgage?
Right now, with interest rates as they are, it makes sense to be organised and ensure you’re ready to switch to a new deal when your current mortgage deal ends.
Most lenders will allow you to lock in a deal 3-6 months ahead of the remortgage date. This means you can plan ahead to ensure a smooth remortgage.
If remortgaging with your current lender, as explained, the process should be quicker. But as it’s worth shopping around too, the earlier the better to get things moving.
