How does switching mortgages work

Your circumstances may have changed since you first took out the mortgage, and your lender will want to see that you can still afford to repay your mortgage, even if the balance has reduced. A mortgage and a remortgage are essentially the same thing - a long-term loan secured against the value of a property. While some products might be available to borrowers regardless of whether they are buying a new property or remortgaging, others will be limited to just purchases or just people who want to remortgage.

There are different types of remortgage products. You can find out more in our guide to types of mortgage , and visit Which? Money Compare to see the latest remortgage deals and compare them on both cost and quality of service. Before you remortgage, do your own research. Ask a couple of estate agents to value your property, and look up sale prices for similar properties on your street using property portals such as Zoopla and Rightmove.

These sites use data from the Land Registry. This will give you an idea of how much your property is worth, and roughly what type of remortgage deal you should apply for. But for mortgage purposes, your lender will do a valuation of your property. This will either be done as a drive-by where a surveyor literally drives down your street to look at your property or using existing sales data to value your home from a computer.

This valuation and the amount of mortgage debt you have will be used to work out what kind of mortgage deal you qualify for. In short, yes. There will be some legal work required when you remortgage your property, and you'll need to use a conveyancer. They will conduct ID checks, carry out further property searches if your lender requires them, and check any terms in your lease or mortgage that need to be flagged to you.

They'll also collect the funds from your new lender and repay your existing mortgage with them. There should be much less work involved than if you were buying or selling a property and, therefore, costs should be much lower.

Many lenders offer free legal advice for remortgaging, but that's not always the case, so it's worth checking. Accepting the free legal advice will mean using the lender's preferred conveyancer.

If you want to appoint your own, check to see if that's possible and whether your lender will cover the fees. If you switch deals during the initial fixed or tracker period, then you will likely have to pay an early repayment charge ERC. The ERC is calculated as a percentage of the outstanding debt and can be quite significant.

In addition, many lenders charge an exit fee to cover the administration of closing your account. Your annual mortgage statement should also set out what ERC would be payable. There may be further costs to account for with the new mortgage, too. This can be added to the mortgage balance, though remember that doing so means you will pay interest on it, so it will cost you far more in the long run. There will also usually be legal fees to cover things like valuing the property and conveyancing.

These fees will be much lower than for someone who is moving to a new property as there is less legal work involved. Limited is an Introducer Appointed Representative of Which? If another lender can offer you better terms and conditions, it may be worth switching your mortgage over to them. One of the most important terms and conditions to consider is your prepayment options.

If a new lender can offer you better prepayment options than your current mortgage provider, switching could help you pay down your mortgage sooner and save you from having to pay additional interest costs. For example, most lenders let you increase your monthly mortgage payment amount once each year, but the amount you can increase it by often varies from lender-to-lender.

If you decide to take advantage of this only once at the beginning of your new 5-year term, your new monthly mortgage payment will go up to:. Complaints, financial help when retired, changes to schemes. Starting a pension, types of pension, understanding pensions. How it works, what you might get, National Insurance. Ways to draw your pension, when can you retire, Pension Wise appointments. Tax allowances, tax paid on pensions, tax relief.

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Help with meeting goals, tax-friendly saving, saving for children. Remortgaging can save you hundreds of pounds. When you first took out your mortgage, you might have signed up for a really good deal. But over time, the mortgage market changes, and new deals become available. This means there might be a better deal available for you now, which could save you hundreds of pounds. These fees can add to the cost of remortgaging and might make remortgaging more expensive than staying on your current deal.

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You can remortgage at any time. Most people remortgage when they get to the end of their fixed rate term as this is when your mortgage might stop being a good deal. Use our Mortgage Calculator to see how much you could save by switching. In the examples below you can see the different amounts you would pay in total, over the fixed period, per month and in interest, depending on if you stuck with your original deal or moved to one of the two remortgaging options.

Both option 1 and option 2 save you money compared with sticking on your original deal. However, the arrangement fee on option 2 makes it more expensive than option 1. The total cost for credit is based on any mortgage related fees being paid upfront and not added to the mortgage. Mortgage-related costs can vary between providers and make your repayments bigger if you add them to the loan. The calculator is for a repayment mortgage where interest is calculated monthly.

The results apply to daily interest where only one payment is made per month. Figures quoted have been rounded. The APRC is a way of calculating interest rates incorporating some mortgage-related fees in the calculation, giving you a way to compare mortgage deals. Every mortgage deal has a limit to how much you can borrow when compared with the current value of the property. When you remortgage, the lower the loan-to-value you need, the more deals that might be available to you — which should get you cheaper mortgage deals.

So when your introductory period ends, take a look at the market to see if switching to a new mortgage deal will save you money. If you only have a small amount left to pay off your mortgage the savings from switching might be too low to make it worthwhile.

Remortgaging might also help you to get a more flexible deal — for example if you want to overpay. Or maybe you want to switch to an offset or current account mortgage, where you use your savings to reduce the amount of interest you pay permanently or temporarily — and have the option to draw your savings back if you need them.

Find out about extra sources of income and support available to help you manage your household bills and save money in our guide What benefits you can claim and other ways to increase your income. If you have a lot of debt, you might be tempted to borrow some extra money and use it to pay off your other debts. Even though interest rates on mortgages are normally lower than rates on personal loans — and much lower than credit cards — you might end up paying more overall if the loan is over a longer term.

Use our Mortgage Affordability Calculator to find out how much you can afford to borrow. Taking advice from a qualified expert offers you extra protection because if the mortgage turns out to be unsuitable, you can complain to the Financial Ombudsman Service FOS. Remortgaging and switching your mortgage. MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper.

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In some cases, leaving your fixed rate early will work in your favour, especially if rates have dropped since you started your original deal. However, it may also be better if you have a short time left on your fixed deal, to wait for it to end before switching.

Either way, a mortgage broker can help you work out if there are savings to be made and if these are relevant to you. Yes, but you will need to meet the credit score and affordability requirements of the new lender. In some cases, lenders may offer free application, valuation and legal fees. If you choose to use a broker, then you may need to pay them a fee as well.

Switching mortgage lenders normally takes between four to eight weeks, but it can take longer if there are complications. Switching mortgage lenders usually takes longer than switching mortgage deals with your existing lender as the application process is often more in-depth than when simply changing deals with your current lender.

Working out if a change in mortgage and mortgage lender is financial beneficially for you can be complicated. A mortgage broker can help you assess the benefits.

Our mortgage calculator helps you to see how much your mortgage might cost you each month. Our how much can I borrow calculator gives you a range of how much a lender might consider lending you under a mortgage. This calculation is only an indication only. Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information.

If you are in any doubt, Moneyfacts recommends you obtain independent financial advice. Read our five tips to repay your mortgage early. Find out how you can become mortgage free sooner. A mortgage broker specialises in finding mortgage lenders who will meet your needs for a mortgage. They do this by providing you with advice and recommending the mortgages most suitable for you.

They will then manage completing your mortgage application. We look at the why's and wherefore's of fixing your mortgage for five or even ten years.