If your mortgage deal is expiring you can choose to either remortgage with a new lender or do a product transfer with your existing provider. But which is best? Darren Polson weighs up the pros and cons of each
The Question
I’m due to remortgage for the first time in the summer having taken out my first mortgage in 2020. I am fully aware that mortgage rates have increased a lot since the days I took out my original mortgage and so I am preparing myself for high repayments.
I wondered if you had any tips to help me find the best and cheapest deal? Someone mentioned it might be easier and less costly to find a new deal with my current lender (Santander), but I’d appreciate some expert clarification on this.
Darren’s Answer
Unfortunately, there are a lot of people in your position. Rates were, on average, significantly lower in 2020 than they are now.
This has meant that many homeowners have seen their mortgage payments rise, and that will only continue as more rates expire. You are right to plan ahead for this.
To find the cheapest deal, speak to a mortgage broker who can access the market and find the lowest possible rate for you, as well as reviewing the rates your current lender has available.
You’ve got two main options:
Remortgage to a new lender
A mortgage broker can search the market based on your outstanding mortgage balance and property value to see what rates are available to you.
This would effectively be a new mortgage application which can incur legal costs and other set up fees.
However, your broker can ensure free legal costs and a free valuation with certain lenders. Some lenders also offer cashback deals for remortgage cases.
There will be a credit scored application and a full income / expenditure assessment.
Switch to a new rate with your current lender (Santander)
This is classed as a rate switch or product transfer.
The benefits of this are that there is almost never a credit score or need to provide proof of income as the lender has already assumed the risk with your current mortgage.
There is also no valuation required as the lender will have their own internal valuation of the property which can mean your loan-to-value is positively impacted by the lender’s valuation, rather than market value.
This could result in a better rate at this may be a better loan-to-value bracket.
Overall, both options can be essentially free to do, it just comes down to the rate difference between your current lender and the others on the market.
It is always advisable to speak to a broker who can provide an assessment of your options and give you the best rates for your circumstances. In addition, they can check your deal again before your new rate takes effect to ensure this is still the best deal for your circumstances.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
