Finding your way through the mortgage maze

With more than 6,000 different mortgages on offer from around 130 lenders you could be forgiven for giving up and just accepting the first offer you get.

But it pays to research when taking out a mortgage and that basic advice applies whether you are a first-time buyer starting out on the property ladder or whether you already have a mortgage and are looking for a new deal.

On a £100,000 mortgage you can save up to £1,300 a year by picking the best-value mortgage compared with the most expensive. That’s a handy £108 a month in your pocket.

However it’s not the case that all deals are open to all customers.
Nationwide Building Society has recently ended its long-standing policy of offering the same deals to all customers. Previously it didn’t matter whether you were a first-time buyer, an existing customer looking for a lower rate or someone looking to move your mortgage to Nationwide. So what does this mean for you?

All customers are not the same so all deals are not the same

Mortgage companies will offer you different deals depending on what sort of customer you are. The basic rule is that they like new business as that is the way they build up their customer base.

So if you are a first-time buyer you will qualify for better deals. Nationwide, for instance, offers deals worth around 0.1 per cent cheaper to new customers than it does to existing customers. That might not sound like a lot but on a £100,000 loan it can be worth around £100 a year.

Many lenders offer better special deals to first-time buyers and similar deals are on offer to people moving their mortgages from another lender.

Surely loyalty pays though

Staying with the same lender for the term of your mortgage – and that can be as long as 25 or even 40 years – ought to make you popular with your company. Well up to a point.

Mortgage lenders always want new business so they offer deals to people remortgaging to them from another lender. That means they’ve taken business off a rival so they’re willing to offer slightly better deals. Again the difference can be around 0.1 per cent or even 0.25 per cent.

If you are coming to the end of a fixed-rate deal then it can make sense to switch to another lender. They’ll offer you a better deal than they’re offering their existing customers and will welcome you with open arms.

Should I stay or should I go?

Whilst lenders offer different deals to existing customers than they do to new customers, that does not mean they won’t be willing to offer a deal to you if you are planning to change to another firm.

You should always talk to your existing lender if you are planning to move mortgage. They may not make you an acceptable offer but it does not hurt to ask as you could be surprised how much they want to keep your business.

Bear in mind that there may be costs involved in moving your mortgage from one firm to another.

Companies will sometimes charge application fees which on average are around £634. You may also get stung from your existing lender in the form of an exit fee for leaving them and going elsewhere. Exit fees can be as much as £202 among the main lenders.

Some mortgages – particularly fixed-rate and discount deals – lock you in once the term of the deal ends. Check the terms of your existing deal for any redemption penalties and whether you can move without any penalty at the end of term. Redemption penalties are generally a percentage of the amount borrowed so it you have a £100,000 loan and have to pay a one per cent fee you will be charged £1,000.

Even if you only have to pay an application fee and an exit fee any savings you make by moving to a lower rate may be wiped out. If you are saving £100 a month on your mortgage it does not make sense to spend heavily on fees. Before you make the move calculate how much you will save and take into account any fees.

Remortgaging makes sense

Cutting down your monthly payments and keeping them as low as possible is the best approach to managing your mortgage. You wouldn’t throw away money in any other part of your life so don’t do it with your mortgage.

Whether you are a first-time buyer, an existing customer or someone looking to move mortgage from another lender you should always keep an eye out for better deals. That means reviewing how much you are paying every year and it should mean keeping an eye on the rates being charged.

Lenders are keen to take remortgaging customers and make it easy to switch. Some even have special departments set up to handle remortgages.
Remortgaging should take no longer than a month whether you are moving from one lender to another or simply moving to a better deal with your existing lender. Always ask for a timetable at the start of the process so you know what should happen when.

And if you are on a deal with a specific term put a date in your diary to start searching for a new mortgage at least three months before the end of the deal. That will mean you are well-prepared.

What Next

If your mortgage offer period in due or you have not changed your mortgage in a while use our best buy tables to find the best mortgage for your circumstances.

If you would like a to speak to a qualified Mortgage Adviser please fill out our quick online form and we can arrange for a Mortgage adviser to call you and provide you advice in this area. Go to the online form now

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