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Matt from Assured FG joins the Mortgage and Protection Podcast to talk about switching mortgages.
Why do people switch mortgage lenders?
The reason that we come across most is that your fixed rate deal is coming to an end, and you’re looking to achieve a better rate elsewhere. But sometimes people want to switch to access certain features that aren’t available with the current lender, such as free overpayments, cashback, portability… the list goes on and on.
When can you switch mortgage deals?
In theory, you can switch at any time, but that doesn’t always mean that you should. When you’ve seen a lower rate elsewhere, you will need to take into consideration any early repayment charges or early exit fees.
What do you need to consider when switching mortgage lenders?
The most important consideration is to be clear what you’re looking to achieve, and what’s important to you. Are you chasing the best rate available? Or looking for any specific features within your mortgage that you don’t currently have?
It’s good to consider your future plans – both in the next few months and longer term. How do they fit in with your mortgage product? You might also want to think about whether there is any charge for leaving your current lender. These can be quite expensive, especially in the early years. If they are a percentage of the mortgage balance, the cost could be in the thousands.
Plus, every lender has their own different criteria, and you wouldn’t necessarily know much about that unless you speak to an adviser. At the moment, for example, some lenders are limiting how much they lend to the self-employed. Some lenders won’t lend on certain property types. Some will offer longer mortgage terms if you want to extend the length of your mortgage to reduce your payments.
It’s all about having a conversation and finding out what’s important to you and whether your lender is delivering that.
Is it really worth switching for just a 1% decrease in the rate?
There’s no easy answer to that – it would make my job a lot easier if it was just yes or no!
The main things to consider here are going to be the early repayment charges. If you’re in a fixed rate deal, these charges are likely to be a percentage of the overall mortgage balance. So if you’re looking at, say, 2% of a £250,000 mortgage, it’s going to cost you £5,000 to leave. In this case, a 1% decrease in rate is very unlikely to be beneficial.
Another real driving factor behind that is going to be the mortgage balance itself. A decreasing rate is going to be a lot more noticeable on a £500,000 mortgage than on a £50,000 mortgage. So we need to put all the elements together, do the calculations and see whether you will be better off by switching.
Do I need to call a broker to find mortgage deals, or can you send some first?
We’ve recently partnered with a company called Dashly. What they do is they proactively try and find the best deal available on the market for your particular mortgage. It’s something that we’re using with our existing clients.
Once we process your mortgage, we will then enter the details into the Dashly online portal, which you also have access to. We include the term of your deal, the rates, the monthly payment, any early repayment charges.
It then runs calculations on a 24-7 basis to see if there is a better deal available for you on the market. It’s really easy to navigate and use and it’s a great way for us to proactively help our clients. We don’t have the time to check the market on a daily basis for each individual client – but this is a great way we can add value.
Does Dashly consider early repayment charges?
Yes, it takes all the current details of your existing deal and factors those into the calculations. Without all the correct details, it wouldn’t always be accurate. At the moment, with rates dropping, you could almost certainly find a better deal, but Dashly works more suitably for you if it’s got all the information.
What happens if the system finds a good deal?
If it finds a deal, we will email you with the details of how much you can save per month and per year. If it’s of interest, we proceed as we would with any remortgage: arrange a meeting, discuss your plans and your needs. We’ll make sure that even if the deal is financially viable, it will also meet all your other requirements. And if it is something that is still looking better for you overall, we look to switch that for you.
To find out more about how Dashly works, or discuss switching mortgages more generally, just get in touch with us and we’ll explain all the options.
Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.