Changing your mortgage
If you already have a mortgage, you may want to switch to a different mortgage or different lender to get a better deal. This may save you money, and it may be possible to arrange temporary or long term changes such as changing the term of your mortgage or making extra repayments.
Will I have to pay any penalties?
You should always check your mortgage agreement before making any change to your mortgage to see whether you would have to pay any fees or penalty charges. These charges could be expensive and might cancel out any savings from a cheaper mortgage deal.
When is changing worthwhile?
Your reasons for wanting to change your mortgage will probably depend on your personal circumstances. You may want to do so because:
- you were tied into your existing mortgage for a number of years, but the fixed term has now ended and better deals are available
- you want a more flexible mortgage which will allow you to pay extra and/or take payment holidays
- you took out a fixed rate mortgage when interest rates were high and want to look for a lower rate now that interest rates have fallen
- you are worried that there will be a shortfall when your endowment policy matures
- you have arrears on a repayment mortgage.
Can I switch to another mortgage deal?
You may be able to save money by switching to a different scheme with your existing lender. Many lenders have more competitive schemes than they did a few years ago – you won’t know unless you ask.
You may want to switch all or part of your mortgage from an endowment to a repayment mortgage because you are worried that your mortgage won’t be paid off at the end of its term. If you are in this situation, you might be able to make a complaint against the person or company who sold you the endowment policy.
Can I switch to another lender?
You may be able to transfer your mortgage to a lender offering more competitive deals. You are more likely to have to pay redemption fees if you do this (especially if you have only had your mortgage for a few years) but it may work out cheaper in the long run. Shop around before you decide.
Can I change the term of my mortgage?
Mortgages don’t have to be for 25 years. If you can afford to pay more each month, you could cut the term, and end up saving a lot of money in interest. Most lenders won’t charge for shortening the term.
Alternatively, you could reduce your monthly payments by extending the term. This will give you a longer period of time to pay back your loan, so your monthly payments will be smaller.
Can I pay extra?
If you do have cash to spare, it may be better to pay off some of your mortgage than put the money in a savings account, especially when interest rates are low. However, you may want to keep enough ready cash for emergencies, such as expensive repairs. You may be able to choose to pay extra each month, or through a lump sum once a year. Check whether your lender calculates interest by the day or the month – if it’s calculated monthly, paying a lump sum once a year may be a better option. You should also ask if there will be any penalty charges involved.
Take a look at Money Helper’s advice Should you pay off your mortgage early?. This might help you decide whether to pay more to your mortgage.