How to switch mortgage providers – Forbes Advisor UK

The mortgage your home is currently on may not be the best or most suitable deal. For example, maybe you’re paying a much cheaper mortgage rate or want a fixed-rate loan to keep your monthly payments constant.

Alternatively, you may simply need a more flexible mortgage that adapts to your changing personal circumstances.

However, achieving any of these goals could mean switching mortgage providers entirely. If you plan to do this, here’s what you need to know.

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How do you switch mortgage providers?

When you reach the end of a mortgage deal, you switch to your lender’s expensive “standard variable rate” (SVR). So this is usually where borrowers try to postpone deals.

The best new deal could be with the same lender, known as a “mortgage transfer.” However, it could also be offered by another lender – known as “restructuring” – entailing a complete switch.

The process, which can be carried out for you by an independent mortgage broker at no cost, should take no longer than a few months.

However, there are important steps along the way that are worth knowing about first.

Check existing penalties

Check the restrictions on your current mortgage. If you’re only halfway through a deal – say two years into a five-year term – there are penalties for breaking the contract early.

It is comparable to the charges for early termination of a TV package or a mobile phone contract. In the case of mortgages, they are known as Early Repayment Charges (ERCs) and – usually set between 1% and 5% of the outstanding mortgage – can easily amount to thousands of pounds.

This means that for many people, paying ERCs would negate the benefits of switching.

It makes sense to wait until you are nearing the end of your existing business, then you can switch without penalty.

Do a health check on your finances

Your finances will be subjected to an affordability and credit check during the debt restructuring process. The new lender will consider how you would handle it if mortgage rates went up.

Self-employed applicants will also likely need company accounts for two to three years.

Before you apply for a loan, you should check your credit report. Do this as early as possible to give yourself time to improve your credit rating if necessary.

Appreciate what you could borrow

Typically, you can borrow up to 4.5 times your salary — or your entire household income if it’s a joint application. However, some lenders allow higher earners to borrow more.

Spending patterns and outstanding debt are also assessed and factored into your affordability.

To get an idea of ​​what mortgage rates you can get, enter your criteria and numbers into our live mortgage tables (below), provided by online mortgage broker Trussle.

The lower your LTV, the lower the mortgage rate. For example, a £300,000 property with an outstanding £180,000 mortgage has an LTV of 60% and a homeowner in this position would have access to some of the most competitive interest rates around. Also consider placement fees and legal fees – although some offers offer the latter at no additional cost.

Get the help of a mortgage broker

For a truly thorough search of the mortgage market tailored to your personal circumstances, use a mortgage broker like Trussle, who will search all available lenders and charge the client no fee.

A broker is particularly useful for self-employed borrowers or those with less than perfect credit.

Brokers can access more offers than appear in comparison charts and know more about each lender’s preferences when it comes to a client’s financial situation.

Different lenders apply different affordability criteria, so one may reject your application even if another accepts it.

Brokers complete the application process once you provide the required documents – such as photo ID, bank statements, payslips and proof of address.

Start your search early

If you’re using a standard variable interest rate, there shouldn’t be any penalties for switching, so move immediately. If you are nearing the end of a deal, you can still shop ahead without penalty.

New mortgage offers are usually valid for between three and six months, so you can secure a deal before the current one ends.

The exact length of time varies between lenders, so be sure to check before applying.

Speak up if your circumstances change

Your circumstances may change after you apply for a mortgage or accept an offer. For example, your income from work changes. This could affect your eligibility for the mortgage you want.

In this case, inform the new lender. Keeping it to yourself could mean having your mortgage offer withdrawn if the changes are caught up.

The lender may ultimately change or withdraw the offer, but your agent may be able to assist with last-minute plan changes.

Last hints and tips

  • Contact a mortgage broker who can advise you on the merits of different offers, put you in touch with a provider and guide you through the application process
  • Be fast with paperwork and document uploads
  • Check what your existing lender is offering. If it matches competing offers, it’s faster and less complicated to stay with the same lender
  • Avoid spending big and limit credit card use before applying for a mortgage.

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