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Switching mortgage provider

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Switching mortgages

There are many reasons why you might choose to switch mortgage, but the most popular is to save money.

Changing mortgages is known as remortgaging when you do so with another lender. You can also switch mortgage deals and stay with the same lender – this is known as a product transfer.

How to switch mortgage deals

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Can I switch mortgage providers?

It depends on your current circumstances - a new lender will need to carry out the same affordability checks and credit searches as when you first bought your home. 

People in certain situations may not always be able to remortgage immediately, for example, if your financial circumstances or credit score has declined, or if your property has fallen into negative equity.

Is a deposit required?

Sort of, although not necessarily a cash deposit. When you remortgage, the equity in your home serves as the deposit. If you don't have enough equity, the remortgage rates offered won’t be as competitive.

You’re also unlikely to be able to increase your borrowing if you only have a small amount of equity, but it's sometimes possible to offer a cash deposit on top to improve your options.

What if I don’t qualify for a remortgage?

If you’re unable to change mortgage provider straight away due to a change in your circumstances, you may still qualify for a product transfer. This is where you change products with your current lender - and many won’t carry out additional affordability or credit checks when you're switching mortgage deals to another of their own.

In many cases, so long as you’ve kept on top of your mortgage payments, you should be able to secure another deal with your existing lender. However, this is not always possible if the interest rates available to you have risen dramatically. This may mean you're unable to meet affordability for the same mortgage again - even if your personal circumstances are the same.

This has been fairly common throughout 2023, given the large increase in mortgage interest rates across the board. If you're struggling to move mortgages to both new and your existing lender, it's best to seek the advice of an experience mortgage broker.

What is equity? Equity is the percentage of the value of your home that you currently own. This can change as your home changes value, but includes your deposit and any repayments you've made to date.

Why might you switch mortgage providers?

There are many reasons people may change mortgage provider, but some of the most common ones are to:

  • Get a better deal on interest charges, saving money on their repayments

  • Extend their borrowing further - either when moving home or as an alternative to a personal loan

  • To enjoy more flexible terms such as overpaying your mortgage, taking a payment holiday or offsetting your interest with an offset mortgages

When is it best to switch mortgage?

Timing is key when you're considering switching mortgages. Here are some circumstances which might mean it's a good time to remortgage:

  • Your current fixed-rate or introductory rate deal is coming to an end - You typically revert onto the lender’s standard variable rate (SVR) at the end of a deal period. SVRs are usually higher than fixed-rate deals, so your mortgage repayments will most likely rise as a result of this

  • You’re on a tracker rate and the Bank of England base rate rises - If you’re on a tracker deal, when the Bank of England (BofE) base rate rises, you'll see almost an instant increase in mortgage costs. Throughout 2022-2023 there have been multiple rises, but when rates start to fall, trackers are generally more appealing

  • You’re eligible for a better mortgage deal as your loan to value (LTV) has reduced - for example, if you borrow £80,000 on a £100,000 property your LTV is 80% to begin with. If the value of your home rises to £120,000, your LTV would fall to around 65%. As lower LTV borrowing is considered lower risk, lenders are typically able to offer you a better rate of interest once it's reduced

The six month window

It’s a good idea to start researching new deals around six months before your current one ends. Most lenders allow you to reserve an offer up to six months in advance, so you can lock in a rate - but you're not committed to it and can change again before the six months are up.

  • The process of switching mortgages can take some time, so planning ahead will mean that switching mortgage can be completed before your current deal ends

  • You can avoid falling onto the lender's SVR (standard variable rate) of interest, which is typically higher

  • Setting up a mortgage switch at the six month mark avoids early repayment charges (ERCs) which you would typically pay if you chose to switch mortgage lenders before your current deal ends

“With interest rates on the rise, many borrowers are looking for the cheapest mortgage deal possible. However, it’s important to bear in mind that rates are changing quickly, so if you spend too long looking, you may find that rates have increased again by the time you’re ready to apply. It’s worth finding a reputable mortgage broker who can look at options from lots of different lenders and trust that they’ve found the best deal for you.”
Kirsty Lacey, Mortgage Expert at Mojo Mortgages

What fees are involved with changing mortgage providers?

Exit fees

Also known as a deeds release fee or mortgage completion fee, this is charged by some lenders to close your mortgage account. This charge typically applies no matter whether your deal has ended or not.

ERC (Early Repayment Charges)

Unless you're on your lender's SVR, you're likely to need to pay ERCs to leave your mortgage deal. This is generally charged as a percentage of what you still owe and can be very costly, especially if you have years remaining on your current deal.

Arrangement and booking fees

Not all lenders charge arrangement fees, and it’s certainly less common with remortgages, however, some lenders may charge one.

Valuation and conveyancing

Your new lender will instruct a new valuation to gauge the current value of your property. Solicitors will also still have to carry out conveyancing and deed changes on your behalf, much like when you took out your original mortgage.

Many lenders offer fee free remortgages as an incentive to switch to them, meaning that valuation and legal fees won't always apply. However, remember to compare mortgage deals across the market to ensure you get the most beneficial terms for your circumstances!

When you look at switching mortgage deals, it’s important that you weigh up any savings against the fees involved with remortgaging - as sometimes they outweigh the savings.

When is it not a good idea to switch mortgage providers?

Getting the maximum benefit from switching mortgages is all about finding the right timing. In certain circumstances you will either be unable to remortgage or will be better off waiting for your circumstances to change. 

If any of the below situations apply to you, then now might not be the right time to switch, however, lender criteria are very complex so it’s always worth having a conversation with an experienced mortgage broker before you rule it out completely.

  • The ERCs are high - Unless you’re already on an SVR, the chances are you would have to pay ERCs to leave your mortgage deal. Be sure to weigh up paying them against the savings you'd make by leaving your deal early as in some cases it may be better to wait until you’re within six months of the end date before you switch mortgages

  • Your financial circumstances have declined - If your financial circumstances have changed for the worse, it may not be possible to meet the affordability requirements of a new lender - especially if rates have also risen since you took out your original mortgage. If you have significant equity in your home, it may help in some circumstances, but there will be fewer lenders willing to accommodate you when your affordability drops

  • Your property has fallen in value - If your property has dropped in value since you bought it the LTV (loan to value) of your borrowing may have risen - depending on how much you've repaid. With a higher LTV the rates available to you are less competitive, so it may not be the best time to refinance

  • You've had recent credit issues - As you’re approaching a completely new lender, they'll want to be sure that your credit record is in good shape. Those with more recent credit issues will be perceived as higher risk, which can make it more difficult to find a deal. That said, some lenders offer remortgages specifically aimed at people with bad credit, so it’s worthwhile speaking to a mortgage adviser for guidance

  • You have a small mortgage balance - If you have less than £50,000 left to repay on your mortgage, switching to a new lender won’t necessarily be beneficial. The costs involved with remortgaging are likely to cancel out the savings you would make by switching to a new deal at this point in your mortgage term. The lower your mortgage balance, the less interest you'll need pay, so the savings you make with a lower rate of interest become more negligible

What about negative equity?

Negative equity is where you owe more than your property is currently worth. This can happen if house prices fall dramatically and/or if you miss multiple mortgage payments. 

Unfortunately, it’s unlikely that you'll be able to remortgage under these circumstances. Lenders won’t usually consider a remortgage application until you've gained some equity back in your home, either through a bounce back in market prices or once you've repaid enough to do so.

What to consider before switching mortgage providers

Before making the decision to switch it’s important to consider the following:

  • A product transfer is typically easier and cheaper to arrange, so make sure your current lender can’t offer you a more competitive deal before you settle on switching mortgage lenders

  • How much your property is currently worth, or more specifically, the equity you have built up and whether it will reduce the LTV (loan to value) of your borrowing enough to positively impact the interest rates available to you

  • Whether your financial circumstances or credit record have declined since you took out your original mortgage

  • Whether your existing deal has high ERCs that would reduce the benefits of switching. Your lender will be able to advise you about any charges that may apply

Kellie Steedquotation mark
When you're considering switching mortgages, timing is the most important factor. This is because your circumstances at the time of the remortgage will determine which deals are available to you, and therefore how much you could save.
Kellie Steed, Mortgage Content Writer

Switching mortgage provider FAQs

Uswitch is not a mortgage intermediary and makes introductions to Mojo Mortgages to provide mortgage solutions. Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website. Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH. Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215) Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH, and head office is WeWork No. 1 Spinningfields, Quay Street, Manchester, M3 3JE. To contact Mojo by phone, please call 0333 123 0012.

Last updated: 30 August 2023