How to switch your mortgageIs it worth it?

1Choosing the deal

Don't just switch to the cheapest deal you see. You need to think first about what type of deal would best suit your circumstances. Also think about any special features you might be interested in, such as flexibility.

2Deciding how you will repay the loan

Think before you sign

You can switch mortgages regardless of whether you've got a repayment mortgage or an interest-only deal. Most people will continue with the same type of repayment method when they switch, but you can easily change this.

For example, some people who have endowment mortgages with a shortfall will take this opportunity and switch part or all of their loan to a repayment mortgage.

Also, see our explanations and pros and cons of the different ways to repay your mortgage.

3Find out how much it will cost you to switch

Depending on your current mortgage, your lender may charge you for switching. Ask your lender for a redemption statement.This will tell you how much you still owe on your existing mortgage and what the switching charges are.

The types of charges you may come across are:

Early repayment charge – if it applies, an early repayment charge (ERC) is likely to be the biggest cost of switching. It could amount to several hundreds or thousands of pounds. If the charge is very high it may not be worthwhile switching as it can wipe out the benefits of paying a lower rate. You're most likely to have an ERC (otherwise known as a redemption penalty) if you're paying a fixed, capped or discounted rate, but some deals tie you in beyond the special deal so it's possible that you may have to pay an ERC even if you're paying the lender's standard rate.
Interest charges – some lenders charge interest until the end of the month in which you switch mortgages. To avoid paying interest on two mortgages, instruct your solicitor or licensed conveyancer to arrange the switch to take place at the end of the month.
Other charges – most lenders also make charges such as a deeds fee, admin fee, discharge fee or sealing fee. These vary, but on average they are usually in the region of £50 to £300, depending on your lender.

4Look at deals versus the costs

You've already worked out how much it'll cost you to switch from your lender – now you need to work out how much it'll cost to switch to a new one. This will depend on the deal you go for as well as the lender you choose.

Costs you may come across are:

Will your new lender be charging additional fees?

Valuation fee - your new lender needs to check that your home is good security for the loan. That means carrying out a valuation to make sure it's worth at least as much as the loan. The lender arranges the valuation but you pay for it. The fee will depend on the lender and the value of your home, but for a £200,000 property you can expect to pay roughly between £200 and £350. Having said that, quite a lot of remortgage deals refund the valuation fee as an incentive to switch.
Arrangement/booking fees - most fixed and capped-rate deals have a booking and/or arrangement fee. These vary from deal to deal but can range from £99 to £5,000. Find out. Some deals now charge a percentage of the amount you borrow – for example 1-1.5%. Watch out for these as the fees can be high.
Higher lending charge - if the amount you're borrowing is more than 75% of your property's value, you may have to pay a higher lending charge (HLC).
Legal fees - you'll need to appoint a solicitor or licensed conveyancer to handle the switch. This person will also usually act on behalf of the lender to check that you have title to the property and there's no reason why the lenders shouldn't lend on your property. This involves carrying out searches such as a local authority search. You'll be responsible for all the legal fees including the cost of the searches and land registry fees. But some deals will offer a refund of legal fees as an incentive to switch, provided that the switch is a straightforward one. In order to get a full refund, you might have to agree to use one of the solicitors on the lender's panel.
Broker fees - if you've used a mortgage broker or independent financial adviser, you might have a fee to pay for their advice.

5Weigh it up

The easiest way to work out whether you'll save money by switching is to use the Which? mortgage calculator.

Before you use it to help you work out whether it's worth switching, you need to have the following information to hand:

Your current monthly mortgage payment.
The costs of switching from your existing lender.

Don't get preoccupied with potential savings

For each of the deals that match your criteria, the Which? mortgage calculator work out the estimated savings you'd make by switching to them. The savings are calculated over a period selected by you and take into account the costs of switching. The savings figure should not be taken as an exact figure. It simply gives an indication of whether it might be worth switching.

It's also important to remember that the deals with the biggest savings might not necessarily be suitable for you (for example, they may have a long early repayment charge period). You should seek independent mortgage advice before switching to ensure that you switch to a deal that is suitable for your circumstances.

6Approach your own lender

Before switching to a new lender, contact your existing one and give it a chance to offer you a better deal. Show it details of the deal you're thinking of switching to and then negotiate. You won't need a new valuation unless you're borrowing more, and you won't need to pay a solicitor if you switch to a deal with the same lender.

7Look beyond the cost

Don't just focus on the savings you can make. Make sure you take into account the penalties that any new deal you're considering attracts. The cheapest deals often have the highest and longest-lasting penalties. You might decide that it's better to make smaller savings but have the flexibility to switch again if you want to.

8Choosing your term

Make sure you choose the term of your new mortgage according to how long you've already had your mortgage. So, if you're five years into a 25-year mortgage, try to take your new mortgage out over 20 years.

If you're borrowing more, you may be tempted to increase your term in order to keep your repayments manageable but you should think carefully before doing this and seek advice.

9Seek advice

Our mortgage finder allows you to get an idea of whether it's worth switching to a new mortgage or not, and to arm yourself with information about the types of deal available. However, we recommend that you also seek independent advice from a broker or independent financial adviser before you choose which mortgage to switch to.

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