Your mortgage is likely to be your biggest financial commitment, which is why it makes sense to regularly review your current mortgage deal to make sure it’s still right for you. In a highly competitive market, switching your mortgage deal could save you money as well as reduce the outstanding term of your mortgage.
If you’ve taken out a discount or fixed rate mortgage deal, there’s likely to be an initial rate, lasting around two years on average. After this time, your rate will change, usually to your lender’s standard variable interest rate.
Changing your mortgage when your current deal ends may not be the best option, especially if the standard variable rate is currently very low, but it makes sense to weigh up the options available to you at this point, if not before.
The most common time to switch is when your current mortgage deal is coming to an end, although many providers will allow you to move mid-deal too.
For example, if you have a tracker mortgage, you may be able to switch to a fixed mortgage before the end of the deal without paying early repayment charges. If your circumstances have changed and you need to budget carefully, a fixed-rate mortgage will give you the benefit of knowing what you’ll pay each month.
On the other hand, you may want to move from a fixed rate to a variable rate or tracker mortgage. This might suit you if the rates are currently more competitive than your current deal and if you can afford to be flexible with your monthly payments in the event of interest rates increasing.
Remember that a mortgage is not just about the interest rate figure. If you’re thinking of switching your mortgage, you should also take into account the fees and charges you might incur when choosing a new product. Depending on the lender and product, these fees may be waived but it’s best to do your calculations first before making the switch. Here are some of the things you need to bear in mind when deciding to switch or not:
Booking fee – this is the charge a bank or building society may put on a product to secure the rate of a mortgage. Sometimes referred to as the application fee, the usual cost typically ranges from £100-£500.
Valuation fee – the mortgage lender will assess the value of the property to establish any changes in the price of the property. According to its value, this can be anywhere from £150 up to £1,500. Again, this fee may be changed depending on the lender and product.
Early repayment charges – if you come out of your present mortgage deal before it ends, you may have to pay an early repayment charge which, in most cases, is a percentage of the loan. For a rundown on all fees and charges you could incur go to our Fees and costs explained guide.
We realise that making your mind up about switching is a big decision, which is why it’s always a good idea to speak to a mortgage adviser before doing so. They will help you look at your various options, especially if your existing mortgage deal is coming to an end. You can find further information about how we can help by going to our ‘How to apply’ page on the West Brom website.