Whether you're coming to the end of a fixed-term deal or just want to scope out what's available at the moment, we look at when you should start your search for a new mortgage.
In the current climate there’s no denying the mortgage market is an intensely competitive place. Mortgage lenders are throwing about remortgaging incentives like confetti to try and get new customers on-board – not to mention many lenders’ Standard Variable Rates (SVR) have never looked feebler.
This means that you, as borrower, are in a good place at the moment; you can scan the horizon for the mortgage deal that’s right for you and are likely to save some money by remortgaging. But when is the right time to make the switch to a new mortgage? A lot depends on the kind of mortgage you are on now.
Fixed rate mortgages
If you’re on any kind of mortgage that has a fixed rate for a set amount of time, the first thing you should do is find out when your fixed term ends. You should be able to find your term end date on your mortgage documents or if you aren’t sure, call your mortgage lender.
It will also be a good idea to find out exactly what you are paying now per month, what your APR is and the number of years plus outstanding amount left on your mortgage. Again, if you can’t find these details in your mortgage paperwork give your lender a call.
On a fixed rate mortgage you are tied in for a certain period of time and won’t be able to switch mortgages mid-term without suffering penalties for ‘early redemption’. As such you may prefer to simply wait till the end of your term then switch to a new mortgage before you revert to your lender’s Standard Variable Rate (SVR).
If you decide to do this, you can use our free email reminder service (http://www.money.co.uk/services/reminder-service.htm) to enter your term’s end date – we’ll send you an email six weeks before it’s set to end so that you have time to look around and apply for a new mortgage.
What if I want to get out of my mortgage mid-term?
If you don’t want to wait until the end of a fixed-rate term, it is of course possible to switch early but you’ll need to take into account possible fees so that you can weigh up whether or not it will be worth it.
Many lenders impose an Early Redemption Charge (ERC) if you remortgage before your term is up, so you’ll have to find out from your lender how much this would be. Other possible charges you may incur when switching mortgages include:
- Legal fees
- Arrangement fees
- Valuation fees
- Solicitor fees
- Mortgage Indemnity Guarantee
Work out the cost of all these charges together and then look at how much you would save by switching to a new mortgage to see if it will be worth it.
SVR mortgages
If you’re already on your lender’s Standard Variable Rate you’re in a position where you can switch whenever you like as you aren’t tied in to a fixed-term deal. You may want to switch from an SVR to a fixed rate right now because locking in while rates are so low will mean you’re protected against rate rises, which must happen at some point in the future.
If this is your intention there’s certainly no harm in scoping out the market now, as you’ll need to allow at least six weeks to go through the remortgaging process anyway.
Even if you don’t see yourself remortgaging for another year or so it’s still a good idea to get yourself acquainted with the market at the moment so that you’ll be in a good, well-informed position to make the best decision when the time does come to remortgage.
What else should I consider?
Whichever kind of mortgage you are on, it’s crucial to check your terms and conditions before you consider switching. Some mortgages come with tricky restrictions; for example some discount rate mortgages include an ‘extended tie-in clause’ meaning you’ll have to stay on your mortgage for a set period of time even after the fixed term has ended. This is another reason why it pays to prepare early if you are looking for a new mortgage deal.
What’s more, while looking at the market yourself is a great way to familiarise yourself with the different options available, when you are serious about switching you should seek the guidance of an independent mortgage advisor who will be able to search whole-of-market and find you a good deal as well as give you whatever advice you need.
As you can see, switching mortgages will always be a time-consuming process when you take into account the time it takes to look at the different options available, decide on one that’s right for you, then apply and have all your paperwork in place.
This is why it’s recommended that whatever kind of mortgage you are on, you should start looking for a new one at least 2 months before you anticipate remortgaging - although really, the sooner you start looking the better.
