Switching mortgage - newby question!

Chilly_will

Hi there, my wife and I are on a 5-year-fixed with Leeds which we took out when we bought our first property. However, this comes to an end soon and we'll transfer to their standard variable rate of 5.44% - this will result in an increase of our monthly payments.

Leeds has mentioned that we could speak to customer service about seeing if there is a better deal that we could be on, however, I am also conscious that we only went with Leeds in the first place because they were one of the few that would entertain a 12.5% deposit at a half-decent rate (in 2012)... so there could be better deals from better lenders today.

My newb question is how to go about doing this and what should we be looking for? Neither of us are experienced in any way with this (nor especially fiancially-minded) so any tips of where to start given the current market etc would be greatly appreciated.

Thanks in advance / Will

kingstreet

Ask your existing lender what customer retention products it has available to you. Ask if it is using the valuation from the purchase or from an indexed/desktop valuation.

Look at remortgage options (that means moving your mortgage to a new lender) as an alternative - remember you will go through all the status checks you faced when you arranged the last mortgage, but valuation and legal fees may be paid for you.

Look here for the recent (last four months) sold prices of similar property in the vicinity (less than 0.5 miles) to establish an estimated value for your property (surveyors do this to obtain their 'comparables') as this and the amount you need to borrow will generate the loan to value you will need to establish the right product banding;-

http://www.rightmove.co.uk/house-prices.html

Speak to an independent broker who will do all of the above for you.

Thrugelmir

Obtaining the options available from your current lender is where you need to start. Then you at least have something to base comparisons on. Remortgaging to a new lender normally comes at a cost. So there's fees to factor in when weighing everything up.

Chilly_will

Thanks both - we'll start by asking Leeds what customer retention products it has available.

Kingstreet - when you say 'Ask if it is using the valuation from the purchase or from an indexed/desktop valuation' - is there one they should be using?

Thanks

kingstreet

A lender can decide on what basis it chooses to value a property for a customer retention product - there is no 'should'.

Chilly_will

Ok thanks - and another stupid question - if we choose to switch lender, can we do this at any time or do we have to do it before we get switched to the variable rate (end of the month)? Wasn't sure if it's like mobile phone contracts where you get locked into another amount of years or whether it just becomes rolling...?

kingstreet

As long as you ensure remortgage completion takes place after any early repayment penalty expires, you can do it when you like. Just remember, the longer you leave it, the more you may be paying on a higher rate.

It typically takes six weeks from application to completion, subject to solicitor ability.

Chilly_will

Thanks Kingstreet, although I have to confess that I don't fully understand - do you mean that when we remortgage, that will technically be early completion so we need to make sure we don't incur the penalty? Is this penalty likely to expire within a reasonable time (as opposed to in ten years!?!?) Like i say, we've had the mortgage for five years. Thanks again

kingstreet

Completion is the point the solicitor draws down the funds from the new lender to repay Leeds.

Presumably any early repayment penalty on your current mortgage ends when your fix ends, so make sure the solicitor knows that date if you do remortgage so he completes no earlier than the day after.

For example, if your fix ends on 30 June, solicitor completes no earlier than 1 July.

Chilly_will

Makes sense - thanks again kingstreet.

Sami_-Finbud

If you took out a 5 year fixed deal, then you will most likely have early repayment charges for those 5 years. This should be indicated on the mortgage illustration they would of given you when you first took out the mortgage.

You will want to have a remortgage in place as soon as the early reapayment charges expire other wise your rate will be 5.44%. The remortgage can take up to anything from 2 weeks to 6 weeks depending on the lender and solictor.

So it may be best to look to remortgage at least 6 weeks before your early repayment charges expire.

Hope that helps