23 December 2022

What does it cost to remortgage away from your existing lender?

By Connect for Intermediaries

Not all lenders offer their existing customers lower rates than those they offer to new customers. This is often a good enough reason for mortgagors to take their mortgage elsewhere. But is this the right thing to do? What are the costs?

This may or may not be a cost-effective decision. It’s advisable to speak with one of Connect’s mortgage brokers to find out if this is a financially viable option or if it’s cheaper to remain with your existing lender and go down the ‘product transfer’ route.

Lenders with a healthy retention rate are more likely to appreciate the benefits of incentivising their customers to remain loyal. After all, it can cost the lender more to seek out new business than to capitalise on what’s already in place.

That said, Connect’s specialist advisers can help with either the product transfer or the remortgage process. They understand that you may not have the time to arrange a product switch yourself and that you would greatly benefit from their expert advice.

If your fixed rate ends in approximately 90 – 180 days, it’s worth checking your lender's policy on product transfers. Your lender can secure a rate until your existing rate ends. At that point, your loan will automatically switch to the new rate.

Product transfers can be deemed more convenient than remortgages because the lender may not require any supporting documentation. This is a huge advantage if you’re time sensitive.

Lenders who do not offer attractive retention rates will naturally lose out to their competitors. If your current lender hasn’t done enough to retain your business, you can begin the remortgage process months before your fixed rate ends and get it to the ‘offer’ stage. Your Connect broker will simply give the new lender the date that you prefer to complete – this will align with the final day of your current tie-in period, meaning you will avoid paying any penalties for settling early.

Reasons you may decide to remortgage:

  1. The rate with your current lender is too high
  2. You may wish to fix for longer this time around and your existing lender only offers a maximum 5-year fixed-term product
  3. Perhaps you haven’t had a great customer journey with your existing lender
  4. You may want to borrow more, and your existing lender doesn’t offer further advances or deems additional borrowing to be unaffordable
  5. You’d like to consolidate your other debt and your existing lender doesn’t extend up to the loan-to-value you need
  6. You may wish to reduce the overall mortgage term and your current lender deems this unaffordable – different lenders will accept different types of income. They may also use different ‘stress tests’ to calculate your affordability
  7. Change in circumstances – you may wish to add someone onto the mortgage with a more complex income type e.g self-employed with only 1-year accounts
  8. You may need more flexible mortgage terms – perhaps you’re planning to sell in the short term and want a lifetime tracker rate with no early repayment charges.

If your current provider is unable to offer the mortgage you want, remortgaging and switching lenders may be the better option for you.

Lenders will still need a bit of time to respond to the government’s recent U-turn. Some brokers have predicted that lenders will start to trim their rates over the coming weeks, assuming that the markets remain relatively stable. We can but hope!

Talking your options through with a Connect broker is definitely a good idea during these unprecedented times of uncertainty.

Read More: https://connectmortgages.co.uk/remortgage/

Contact Connect:  https://connectmortgages.co.uk/contact-us/

For adviser use only. Please note this content has been supplied by our lender partner and as such, is their responsibility. No party shall have any right of action against Legal & General in relation to the accuracy or completeness of the information in this article.