Lance Beare, managing director at Freedom Mortgages, discusses when and why borrowers should start looking at new mortgage deals
With interest rate rises predicted for the near future, mortgage rates have been an increasingly popular topic of conversation. Everyone is keen to lock into a low mortgage rate but not everyone’s mortgages are up for renewal.
The question is, when is it realistically worth looking at new mortgage deals?
Three months from renewal
The ideal time to start looking at new mortgage options is three months prior to your renewal. This will give you time to submit your application and for lenders to process it. If you are three months away from renewal and do a full submission, some brokers, including Freedom Finance, can lock in a rate and hold that rate until you are due to renew.
In some cases, several lenders can even arrange to transfer your product over on the same day as your renewal is due.
More than three months away from renewal
Don’t worry if you’re more than three months away from renewal, all is not lost. Some people might think that it’s not worth looking at other deals if your mortgage is mid-term, but that isn’t the case.
You can switch your mortgage deal at any time and it is always worth checking what deals are available in the market place as you may be able to save money – even if you have a penalty charge to get out of your current mortgage.
It is worth working with a mortgage adviser or broker to compare your current and potential new deal, looking at monthly and total repayments to see how much the saving could be each month with a new rate. If you are fixed into a higher rate for several years, the difference in APRC (Annual Percentage Rate of Charge) now could save you significantly each month.
Early repayment charge and fees
The penalty fee for switching your mortgage early might initially seem like a deterrent but it is worth exploring the options before letting this put you off. Some lenders may waive the penalty fee if you have an existing mortgage product with them and you choose to renew with them; others may offer cashback which could offset part or all of the early redemption charge. But your mortgage adviser will guide you through this.
It is also important to weigh up the other one-off costs involved in switching, including product, legal and valuation fees. There may be options to cover these as certain lenders could offer to cover the cost of legal fees to remove this additional cost of switching.
When looking at switching your mortgage at any time, it is important to shop around for the best deal. If you are switching mid-term consider the full picture, weigh up your current deal against a new deal, remembering any one-off costs that might come with switching.
