Switching mortgages
Some people use the word remortgage to describe the action of switching mortgage deals. For the purpose of this guide remortgaging describes a way of releasing equity from your home. See remortgage guide for more.
Switching mortgages is simply ending your current mortgage and starting a new one. This is usually to transfer from a standard variable rate to a lower rate for a fixed period and will usually mean switching mortgage lenders - however more often now lenders offer new deals to existing customers as well as new customers. Switching mortgages does not involve moving house; it is just moving your mortgage and so it is a much faster and less complicated process than taking out a new mortgage on a new property.
Why switch?
Get a lower interest rate and save money
Mortgage lenders offer remortgage deals to attract new customers
who already have mortgages with other lenders - this is simply switching
mortgages and does not necessarily involve increasing your mortgage
value. These incentive interest rates allow people who switch mortgages
to pay a lower interest rate for a fixed period - usually between
one and five years. Below are explanations of the promotional interest
rates lenders offer:
By switching from a variable rate to a lower interest rate you could make substantial savings over the mortgage term and possibly pay off your mortgage early. However it is still important to know the new lenders standard variable rate because this is what you will be transferred to after the introductory offer ends.
Change mortgage type
You may also decide to switch mortgages in order to change the type
of mortgage product you use. This might be the case if you have
changed job and would like a more flexible mortgage to suit a less
certain payment structure. There are a huge number of mortgage types
available for people interested in switching. Here are the main
mortgage types explained:
The cost of switching mortgage deals
If you end your current mortgage to join another lender you may have to pay a charge. These charges are known as redemption penalties.
You may also have to pay the costs associated with arranging a mortgage with a new lender, although lenders often offer fee free mortgages to attract people who are interested in switching.