Since last week, several of the largest mortgage lenders in the UK have withdrawn their deals from customers altogether. These include Virgin Money and Skipton Building Society. Furthermore, a number of other lenders, including Halifax, TSB and Santander have additionally withdrawn fixed-rate mortgage offers or replaced them at increased rates.
As such, with interest rates and consequently mortgage repayments being constantly repriced, it is worth checking whether you should get a new mortgage. This guide will outline some time steps to follow in order to check whether you could be receiving a better mortgage deal for your property.
- Benchmark What Types of Rates are Out There
There are several online mortgage comparison tools available online that can help you to see what is currently available, as well as compare these offers to what you may already be paying.
It is important to note that while these calculators are considered to be relatively accurate, the rates are changing incredibly quickly. As such, if you are ready to switch, you must remember to check these rates through the tool multiple times a day or week.
- Look at the Finer Details of Your Current Mortgage
It is certainly worth looking at the finer details of your current mortgage so that you can accurately compare these against alternative offers.
Details that should require attention include:
- The rate
- Type of mortgage
- Introduction deal
- Number of repayment years
- Is there a charge for switching deals?
- The loan to value
- Check Out Your Current Lender’s Cheapest Deal on Offer
Securing a new mortgage deal with your current lender is known as a ‘product transfer’.
It is worth doing some comparative research prior, and showing your existing lender alternative rates that you are being offered online. Product transfers are becoming more common practice as it can often be easier to get accepted, as well as having lower fees than switching lenders altogether.
- Use Your Savings to Help to Secure a Cheaper Deal
If you owe over 60% of your home’s value on a mortgage, then it is worth trying to drop an LTV band as this will help to cheapen your mortgage.
The main LTV bands where interest rates will really drop stand at 90%, 80%, 75% and 60%. If you can tap into your savings without taking from your emergency fund, then it is worth using these towards remortgaging, especially if you are close to the next LTV band.
- Consider Whether You Want a Fixed or Tracker Mortgage
If you are able to stick to a budget, then you should opt for a fixed-rate mortgage, and fix the rate for as long as possible.
However, it is worth noting that at present, tracker mortgages are likely to be cheaper right now. If the base interest rate does rise, then there is potential for tracker repayments to chance frequently so this is important to be aware of.
- Assess Whether You Would be Accepted for a New Mortgage
There are two big factors that should be considered when assessing whether you would be accepted for a new mortgage. These include an affordability check and a credit check.
Lenders must carry out strict affordability checks to check whether you are able to afford mortgage repayments on top of your other living expenses.
Especially with living expenses on the rise, this means that acceptance through this check may be made more difficult. As well as this, lenders will also conduct a ‘stress test’ to assess how well you would cope with repayments if interest rates rose.
In addition to the above, lenders will also conduct a credit check. A poor credit history can mean that you may not be accepted for a remortgage application, or will not qualify for the cheapest deals available. It is worth checking your credit score for free to ensure that there are no errors in your history.
There are a number of companies that are classified as non status lenders and this means that your credit score is not part of the decision making process, but rather the property’s value and potential. This is used more for development and bridging opportunities and is available from challenger banks and private lenders.
- Speak to a Mortgage Broker
Each mortgage lenders’ acceptance criteria will differ from one another. Further, their criteria will also be subject to last-minute change, especially in the cost of living crisis. For instance, one mortgage lender may include overtime, commission or alternative streams in your income assessment, while another may only consider your base salary alone.
Mortgage brokers will conduct the work for you in finding the best deals available for you. They usually have access to most lenders’ acceptance criteria, as well as details of other deals including product transfers. As such, they can help you to secure the best mortgage deal possible to you.