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A guide to switching

Why switch?

By switching your mortgage, you might save yourself a lot of money in the long term, so it’s always a good idea to explore your options. Even the idea that you may switch may prompt your current provider to offer you a better rate based on a change in BER or LTV. But if you shop around, moving to another provider might make more financial sense. 

Just make sure you know all of the costs of switching. These can include breakage fees if your current mortgage is on a fixed rate; solicitor's fees; valuation fees; and a BER assessment if you're going for a green rate.

Top tip

Consider cashback offers carefully. Cashback gives you a lump sum when you take out a mortgage. It may be attractive to switch for this reason but could mean you end up paying more on your mortgage in the long run.

Switching – what's involved?

When you switch mortgages, there are steps you need to take, depending on whether you're staying with your current provider or moving to another. In each case, you will have to apply for the new mortgage and pay off the old one. 

If switching to a new provider, although you're not buying a home, you will go through the same process as a buyer applying for a new mortgage. The new lender will do the same credit checks as with a new customer.

Factor in the conveyancing process when considering switching, as you’ll need a solicitor to complete the legal work involved in moving your mortgage to a new lender. Some lenders may offer a contribution toward legal fees, typically in the form of a cashback offer if you switch to them, but it’s still important to confirm what the total cost will be so you know whether switching makes financial sense.

Top tip

If you are on a variable rate, you should review your mortgage every one to two years to see if there are better rates in the market, and if so, either negotiate a better deal with your lender, or switch. On a fixed rate? You should review ahead of the fixed period ending to avoid paying more if you move to your current lender's variable rate.

Switching in six steps

Step 1. Assess your current mortgage 

  • Estimate the current value of your home. When you are considering switching, it is helpful to know the approximate value of your home. Many estate agents offer free valuations. If you are switching your mortgage to a new provider, they will require you to get a formal valuation done by one of their approved valuers.
  • What is the outstanding balance on your mortgage? The amount left on your mortgage compared with the value of your property is called your loan-to-value (LTV). As you pay off your mortgage, your LTV decreases. A lower LTV may get you a lower interest rate.
  • What is your remaining term? 
  • What interest rate are you currently paying?

Step 2. Research and compare mortgage options 

  • See what rates are currently on offer from providers. Use the CCPC's Switcher tool to compare rates and find out if you will save if you switch. Lenders may offer different options for existing customers. Before you switch, you should also check the “existing customer” section of your current lender to see what rates you could get directly.
  • Consider whether to switch to a different lender or to another mortgage from your current provider. If you have moved to a lower LTV band or have increased the BER of your home since taking out your mortgage, you may be able to get a better rate with your current lender.
Top tip
Cashback can help with upfront costs, but don’t let it distract from the bigger picture. Cashback mortgages often come with higher interest rates, which can cost you more over time than the upfront bonus is worth. Always compare the total cost over the fixed term and check for clawback rules if you switch again early.

Step 3. Gather the required documentation

You will need to provide: 

  • Proof of identity (e.g. a passport)
  • Proof of address (e.g. a recent utility bill)
  • Proof of income (e.g. recent payslips)
  • Evidence of financial management (e.g. bank statements)

Step 4. Apply for the new mortgage

  • Complete a full new mortgage application
  • Submit all required documentation
  • Get approval in principle

Step 5. Conveyancing – legal steps 

  • Engage a solicitor to handle the legal aspects of the switch
  • The new lender will send funds to your solicitor to pay off your existing mortgage
Top tip

Give yourself enough time for this process. While switching may be simpler than buying, similar bottlenecks can occur if legal documents aren’t ready.

 

ESRI research shows that delays are the number one stressor in property transactions, with one-third of buyers experiencing conveyancing delays.

Step 6. Complete the switch 

  • Your solicitor will clear the outstanding mortgage with your current lender
  • Now you will draw down your new mortgage

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