Mortgage Guides

Switching mortgages – Top tips

Updated: Wednesday 11 May, 2011

By Hazel Cottrell hazel@consumerchoices.co.uk

If you are considering switching mortgages, make sure you follow our top tips for getting the best deal...

If your current mortgage is no longer competitive, then switching to a better mortgage deal can be a great idea.

However, choosing a mortgage can be a tricky process and getting tied into an unsuitable mortgage could cost you hundreds - if not thousands - of pounds each year.

If you’re thinking about remortgaging, follow our top tips to ensure you make an informed decision and don’t get caught out!

Give yourself time - Your house is probably the biggest purchase you’ve ever made and its likely that mortgage repayments account for of a large chunk of your outgoings, so it’s crucial that you do allow yourself time to find the best mortgage. Don’t just go for the first attractive offer you see and don’t be rushed into anything. When switching mortgages it’s important to take your time and look at all the options on the market.

Look into the future - When deciding on a type of mortgage, you will need to take a view on where interest rates might go in the future. If you think they may stay low or fall then a tracker mortgage could prove to be a good deal.

But if you think they are going to rise, then fixing your rate while rates are low could be a better plan. For an outline of the different types of mortgage available, see our mortgages explained guide.

The best mortgage for you – When switching mortgages, it’s essential to look for a mortgage that suits your own circumstances. You can calculate your potential monthly repayments with our mortgage calculator to assess affordability, but should also look at whether the mortgage has features that may suit you, such as those including an overpayment option.

Speak to your lender - When you are looking to remortgage, it’s definitely worth checking what your current mortgage provider can offer you. They may have competitive deals available to existing customers and, if you switch to one of these, you may be able to avoid paying extra fees and charges. However, it’s essential to compare any offers you receive with other mortgages on the market.

Read the small print - When comparing mortgages, it’s useful to look at the Key Facts Illustration (KFI) of each product. This document sets out all the important features of a mortgage in a standardized format, so should make comparing deals easier.

Watch out for extra costs – When remortgaging it’s crucial to look at more than just interest rates. When calculating which deal is best for you, and indeed whether you would actually benefit from switching mortgages, you need to take into account the set-up fees of a new mortgage as well as any exit fees or redemption penalties your current lender may apply.

Look for flexibility - If you think you may be able to increase your monthly repayments in the future, you should look for a flexible mortgage that allows overpayments. Read our guide to overpayments to see how overpaying on your mortgage, even by a relatively small amount each month, can shave years off your mortgage term and save you thousands of pounds in interest.

Get some advice – If you are at all unsure about which type of mortgage will suit you, or want to save some of the hassle of comparing mortgages yourself, you should definitely consider consulting a mortgage broker or independent financial adviser (IFA).

Be prepared for the next switch - The cheapest mortgage deals usually only last for two or three years. If you choose a fixed-rate deal or a tracker deal that ends after a certain period, be sure to make a note of this date. After this period your interest rates are likely to increase, so when the end of the deal approaches you should start looking for a new mortgage again.

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THINK CAREFULLY BEFORE SECURING ANY DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.