Should you have only taken out your mortgage about a year ago, it is not too early to consider switching. You must usually wait until you’re at least a year into a mortgage before a lender will allow you to switch your mortgage to it.
“Some lenders will consider letting you switch your mortgage if you’re six months into a mortgage,” said Dowling.
“If you’re switching six or 12 months after taking out a mortgage, make sure the costs of switching are covered by your new lender as it won’t have been long since you paid for the valuation and legal fees on the original mortgage.”
Some lenders offer to meet the cost — or pay a contribution — towards your legal fees. Some will also cover the cost of the property valuation.
Should you have a fixed mortgage, your lender could charge a redemption fee (a fee to cover the cost of you breaking your fixed rate contract) if you switch to another lender before your fixed mortgage term is up. Redemption fees can run into the thousands and so it may be wiser to wait until your fixed term expires before switching.
It can be cumbersome to switch your mortgage. “It takes on average between three and four months to switch so it’s a very slow process,” said Dowling. “When you switch to a bank, your new lender won’t know you so you’ve to go through exactly the same process as you did when you applied for your original mortgage.”
This means you must provide your new bank with all the documents it requires with a mortgage application — including salary certs, your P60, proof of savings, current account and loan statements for the last year, and so on.
Before switching, check the track record of the lender: choose a lender who has been fair to customers and who passes on interest rate cuts to existing (as well as new) customers.
You may not even have to switch to a new lender to get a cheaper mortgage — particularly if you’re a few years into your mortgage. The proportion of the value of your home which you are borrowing could now be much lower than when you first took out your mortgage — and you may qualify for a lower interest rate as a result.
Your bank may offer you a lower rate even if you don’t strictly qualify for it.
“If you want to switch, talk to your existing lender first,” said Dowling. “A bank will not want to lose your business so it may move you to a cheaper rate.”