Remortgage with existing lender or new lender: which is right?

When it comes to remortgaging, one of the crucial decisions UK homeowners face is whether to remortgage with their existing lender or switch to a new one. Both options have their advantages and potential drawbacks. This guide will help you understand the nuances and make an informed choice that suits your financial goals.

Table of Contents hide

1 Understanding remortgaging

2 Remortgaging with your existing lender

2.1 Advantages

2.2 Disadvantages

3 Remortgaging with a new lender

3.1 Advantages

3.2 Disadvantages

4 Making the right choice

5 How to Decide?

6 In summary

7 FAQs

Understanding remortgaging

Remortgaging involves paying off your existing mortgage and replacing it with a new one. Homeowners usually consider this option to secure a better interest rate, consolidate debts, or release equity from their property.

Learn more: How to remortgage

Remortgaging with your existing lender

Advantages

1. Simplicity and convenience: Staying with your current lender can make the remortgaging process smoother and quicker. Since your lender already has your details and payment history, the administrative process can be less cumbersome.
2. Lower fees: Remortgaging with your existing lender may involve fewer fees. You might avoid some of the costs associated with switching lenders, such as valuation fees and legal costs.
3. Customer loyalty offers: Some lenders offer loyalty discounts or exclusive deals to existing customers. It’s worth checking if your lender provides such benefits.
4. No early repayment charges: If you are close to the end of your current mortgage term, your lender might waive early repayment charges, making the switch cost-effective.

Disadvantages

1. Limited product range: Your current lender may not offer the most competitive rates or diverse products compared to the wider market.
2. Lack of Incentives: New lenders often provide attractive incentives to switch, such as cashback offers or free legal services, which you would miss out on.

Learn more: Remortgage with the same lender

Remortgaging with a new lender

Advantages

1. Competitive rates: By exploring options from different lenders, you can find more competitive interest rates and potentially save a significant amount over the term of your mortgage.
2. Better deals and incentives: New lenders often entice customers with attractive offers, including lower rates, cashback, and other incentives.
3. Tailored products: A new lender may offer mortgage products that better suit your current financial situation and future plans.

Disadvantages

1. Additional fees: Switching lenders typically involves extra costs such as valuation fees, legal fees, and potentially early repayment charges from your current lender.
2. More paperwork: Applying with a new lender means you’ll need to go through the entire application process again, including credit checks and income verification.
3. Potential delays: The process of switching lenders can take longer, potentially leading to a period where you’re not benefiting from the best rates available.

Making the right choice

1. Assess your financial situation: Consider your current financial status, future plans, and how long you plan to stay in your property. This can influence whether staying with your current lender or switching to a new one is more beneficial.
2. Compare deals: Consult with mortgage brokers to explore the best deals available in the market.
3. Calculate the costs: Weigh the total costs involved in switching lenders against the potential savings. This includes any fees associated with both staying with your current lender and moving to a new one.
4. Check eligibility: Ensure you meet the eligibility criteria for new mortgage deals, especially if your financial situation has changed since you last applied.

How to Decide?

When deciding between remortgaging with your existing lender or a new lender, consider the following steps:

Assess your current deal: Understand your current mortgage terms and identify your goals (lower payments, fixed rate, equity release).

Compare offers: Use comparison sites and consult mortgage brokers to explore deals from both your existing lender and new lenders.

Calculate costs: Factor in any fees associated with switching lenders versus the potential savings from a lower interest rate.

Check eligibility: Ensure you meet the criteria for new mortgage deals, especially regarding credit score and property valuation.

In summary

Whether you choose to remortgage with your existing lender or switch to a new one, the key is thorough research and careful consideration of all costs and benefits. By understanding your financial situation and goals, you can make a decision that best supports your long-term financial health. Remember, consulting with a mortgage broker can provide valuable insights and help you navigate the remortgaging process more effectively.

FAQs

Continue Reading