There are many different lenders that offer mortgages and we can often hear that we should consider switching to a different one. However, you may just think that it is a big hassle to do that and you would rather stick where you are. You may even find that swapping will cost you money and so wonder whether it is not worth it even if you go to a cheaper lender. It is worth getting a good understanding of what to consider and then this should help you to decide whether switching will be the right decision for you.
Interest
The interest rate is one of the ways that you are charged for your mortgage. Some might have other fees as well but these tend to one off fees rather than monthly which is why they have separate category. If you compare the rates between different lenders you will be likely to see some differences and you could even find that you will come across lenders that are charging significantly less than you are paying.
It is good to notice that there is a difference between lenders in that some charge a fixed rate and some charge a variable rate. This will make a difference in the rates that they are offering. A fixed rate will stay the same for a stated period of time. This is often a number of years. The advantage of having a fixed rate is that you will know how much you are paying each month. The lender will not be able to put the rate up so you will not need to worry about this happening and the risk that you might not be able to afford the repayments. However, they can have a higher interest rate than those on a variable rate so you will need to consider whether it is worth it.
With a variable rate, the interest rates could come down if the base rate falls or the lender decides to lower it. This means that you could take advantage especially if rates fall a lot. However, there is also a risk that rates might go up. You might be able to guess whether they will rise or fall based on what level the rates are at, but it isn’t always that easy.
Fees
You will find that mortgage lenders also charge for different things with fixed fees. If you set up a mortgage there is likely to be an arrangement fee and so if swap lenders you may have to pay this to your new lender and so it is worth checking if there one and how much it is. You may also find that there is an early redemption fee. This means that if you repay your mortgage early you get charged. This can apply when you swap lenders as well because you will be effectively repaying the mortgage with your original lender using the mortgage from the new lender. This amount can be quite significant in some cases. Some of them just have a fee if you swap from them to a new lender. Either way, it is important to make sure that investigate these costs as they could be high and it may not worth swapping to get a small reduction in interest if these fees are really high.
There may also be other factors that you might consider as well. When you swap you may have a different repayment amount or schedule and you need to make sure that you can still afford it and that you are happy with it. You also need to think about whether you are happy with the lender themselves as some people like to use one that has a good record or reputation or that they have used before.
