Is switching your mortgage the right thing for you?

With many things to consider in life – broadband, mobile phones, car insurance – it pays to shop around for the best deal. Mortgages are no different. 

  • First, do you need to switch at all?

    First, do you need to switch at all?

    Remember that if you are moving house you don’t necessarily need a new mortgage if your current one is 'portable' - which would allow you to just transfer it across to your new property. Obviously the outstanding amount is likely to change, but the provider will stay the same.

    Remember that your provider will review your budget and consider your financial position to see what’s most suitable for you.

  • Why might you want to switch?

    Why might you want to switch?

    One of the biggest reasons why people switch mortgages is to save money. As a general rule, most people will either switch to reduce their monthly repayment or switch to lengthen the term of their current mortgage - both of which usually amount to the same thing, a reduction in monthly mortgage repayments.  As your mortgage is likely to be your biggest single outgoing, saving just a small amount each month can really add up over of the course of time.

    In terms of considering mortgage features, you might like to look for a mortgage that offers you a degree of flexibility. Why? Well, let's say that finances are tight at the moment, but they won't necessarily stay that way forever,  whenever you have any spare cash (perhaps you’re self-employed, or get paid bonuses at work?), you can make one-off payments against your mortgage to lower the outstanding balance (limits pay apply so check with your mortgage provider first).

    You might have an imminent birth, for example, and are therefore keen to choose an option where taking 'Payment Holidays' is available to help you get through the lean months when you are on a far lower wage.

    Basically, it's down to you to understand your own circumstances and talk these through when you are making both your inquiries and decisions. Just know that there are a number of mortgages out there that offer assistance (subject to terms) during the various lifestyle changes you may go through.

    Try to give some thought to the type of interest rate packages that are available too. For example, if you'd like the comfort of fixed monthly repayments, to either avoid any future rises in interest rates or just to have the peace of mind of knowing exactly what you'll pay each month, a Fixed Rate mortgage product may be a consideration for you. But if you can get a better deal on an interest rate package that, for example, tracks the Bank of England base rate (even though the rate can go up, as well as down, which means that your repayments can go up as well as down), it could be that your monthly repayments actually start off lower than the payments compared with the fixed rate.

    Do understand the risks involved, though - if the base rate goes up, so will your repayments, then if it goes up again you could possibly end up paying more than had you chosen a Fixed Rate product. It can be a tough call to make, so it's depending on your budget, attitude, aversion to risk and of course the economic climate.

    There are range of packages out there to suit most people and banks are there to help you with these difficult decisions. They will explain everything you need to know, so that you can make an informed choice based on your own personal circumstances.

  • It's not too different from getting your first mortgage

    It's not too different from getting your first mortgage

    Even if you've owned property before, mortgage lenders will still assess your application according to your:

    • Loan-to-value ratio
    • Credit score
    • Ability to make the repayments, and whether the mortgage is affordable for you
  • What costs will I incur?

    What costs will I incur?

    The cost of switching mortgages (or remortgaging as it's often referred to) can change significantly from lender to lender. Some lenders offer incentives for you to switch where they may pay for a valuation, settle your legal fees and essentially make the cost of switching entirely free.

    Other lenders, for example, may offer you a cashback incentive where, subject to Terms and Conditions, they may offer you a fixed cash sum if you switch your mortgage to them, and before a certain date. This cash sum can help to cover some of the costs associated with the remortgage. But whatever incentive is offered, it's down to both you and the new lender to organise some of the important jobs we've outlined below:

    • Appoint a solicitor to prepare the paperwork and carry out the necessary legal searches on your home
    • Pay and arrange for a property valuation
    • Sign the new bank's legal contract and arrange a 'completion' date
    • Make sure that your home insurance for both for buildings and contents remains in place. It is unlikely that you will be able to complete on a mortgage (whether you're a first time buyer or a switcher) without evidence that your buildings (at the very least) insurance is firmly in place.

    Summary

    Choose your new mortgage lender carefully and give some thought to what offers and incentives are out there and what assistance is available to help cover the costs of switching mortgages.

    Make sure you understand the switching process and the level of support you will be given. And (despite having just done this!), pop a note in your diary to do it all again whenever your deal expires, in however many years ahead!

Danske Bank mortgages