As a rule of thumb, when you renew any contract, you should be prepared to move from your current provider. That does not, however, necessarily mean that you should move from your current provider. In fact, if you’re remortgaging, there can be a lot to be said for staying with your current lender. Here is a quick guide to what you need to know.
The basics of remortgaging
In the context of mortgages, there are two key dates all borrowers need to keep in mind. The first is the mortgage amortisation date. In other words, the date when the mortgage is fully paid off. The second is the mortgage terms. In other words, the date when your current deal comes to an end.
It’s vital to have a new deal ready to go when that happens. If you don’t, you’ll be put on your lender’s standard variable rate (SVR). This is their default rate for customers who don’t have a specific offer. It’s often significantly higher than any of their mortgage deals. The process of getting a new deal is known as remortgaging.
The practicalities of remortgaging
If you move to a new lender, the process of remortgaging itself will be virtually if not completely identical to the process of taking out your previous mortgage. If, by contrast, you stay with your current lender, the process can be much more streamlined. This has three main advantages
Reduced costs
The fact that remortgaging is the process of switching from one mortgage supplier to another. Even though you're not moving house, when you remortgage, you will need to have some set of costs to pay. These are likely to be higher than they were last time if only because of inflation.
If, however, you stay with the same lender, the administration can be kept to a minimum. This means you can expect the costs to be a lot lower. They will probably be well aware that keeping existing borrowers costs less than attracting new ones.
The reduction in costs is particularly relevant if you need to roll the mortgage set-up costs into the cost of the loan. You’ll not only save the headline sum but also save the interest you would otherwise have paid on it.
Reduced administration
Staying with your existing lender can also save you time and, potentially, stress. Remortgaging with a new lender will involve doing all the same paperwork you did when you got your previous mortgage. This in itself is both tedious and time-consuming. It can also be stressful, particularly if you’re working to tight deadlines. What’s more, these may be forced upon you by delays outside your control.
Existing relationship with the lender
If you’re generally happy with your existing lender then this is a reasonable point in their favour when deciding who should get your custom. Keep in mind that the nature of mortgages makes it quite difficult for customers just to take their business elsewhere.
Exiting a mortgage deal early to go to another provider is often even more expensive than a standard remortgage. This means that, in the real world, customers often just have to grit their teeth and deal with their lender until the end of their mortgage term.
Getting the best right when you remortgage
In theory, getting the right deal when you remortgage may require you to move lenders. In practice, your existing lender may be willing to match another deal for which you qualify. Essentially, the better a customer you’ve been, the more likely it is that the lender will want to keep your business. At the very least, therefore, you should consider giving them the opportunity to do so before you commit to moving your custom elsewhere.
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