Why & How to Switch Mortgage Providers
There’s one very good reason for switching your mortgage. Money. Gone are the days of taking out a mortgage and staying with the same mortgage type and provider until it is totally paid off. Today’s mortgage market is continually changing with fluctuating interest rates and mortgage lenders continually adjusting their prices.
By switching to a different mortgage type or provider (also known as remortgaging) you could save yourself thousands of euros throughout the term of your mortgage. Whether you are switching for a better rate, better customer service, or increasing the amount of your home loan, there are many competitive remortgage providers in the market.
There are many reasons why people choose to remortgage their home:
- Ending of a special deal (such as a fixed-rate mortgage, a variable rate mortgage or a tracker mortgage)
- A change in personal circumstances
- Changing a joint mortgage
- Interest only mortgage to a repayment mortgage
- Fluctuating interest rates
- Increasing cash flow
- Lower monthly payments
Many mortgage lenders want you to think that switching is complicated but switching mortgages need not be complex, it can be a relatively quick and easy process.
Borrowers should be periodically checking that they are getting the best mortgage deal and that their mortgage suits their current circumstances. This can be done by reviewing the annual mortgage statement sent from the provider which details:
- Payments over the year
- Interest over the last year
- Remaining balance
- Remaining term on the mortgage
- Cost of paying off the mortgage, including any charges
By reviewing this statement, you will be able to compare the competitive rates available in the market place.
The following are common mortgage types to switch to. Each offers different benefits and advantages.
- Variable: Switching to a variable rate means your repayments can increase or decrease.
- Fixed: Switching to a fixed rate means that your repayments will remain the same for an agreed period (usually between 1-5 years).
- Capped: Switching to a variable rate mortgage means that it will not rise above a certain level, for an agreed period of time.
- Discounted: Switching to a discounted rate mortgage means that mortgage repayments are at a lower rate for a promotional period.
- Tracker: Switching to a tracker mortgage means your mortgage rate is aligned to a benchmark rate. Your rate will go up and down with it. Unfortunately Tracker mortgages are now like gold dust and are no longer offer by banks. Those who have them are strongly advised to hang onto them!!
To begin the process of remortgaging you should first ask your current mortgage lender if they are prepared to offer you a more competitive deal before switching.
If choosing to switch providers it is very important to check the terms and conditions in the small print of the mortgage contract which will detail whether there are any fees or penalties (Redemption fees) for paying off your mortgage early or switching to a new deal. These charges can be expensive but they may be balanced out by lower monthly payments.
Check out MyHome.ie Mortgages deals and get the latest rates available from a number of leading mortgage providers in the market.
Whichever type of remortgage deal you opt for, you need to know what interest rate you will be paying and if you are on a special rate you need to know for how long. These charges may outweigh the savings.
Once you are aware of everything your current lender will charge, you need to consider the costs of getting a new lender. These include arrangement fees, valuation fees and the legal costs. To help decipher how much you can afford to borrow, you can use an online mortgage calculator to give a quick indication.
Please note that remortgaging may not suit everyone. If you only have a short period before your mortgage is paid off in full, or have a mortgage with large penalties, the costs involved with remortgaging may outweigh the benefits.