Is Sticking with Your Existing Mortgage Lender the Best Option?

When your mortgage deal ends, deciding whether to stay with your current lender or switch to a new one can be a difficult decision. Staying with your lender, often referred to as a “product transfer” or “rate switch”, is sometimes the best choice—but it depends on several factors. Below, we’ll break down the advantages and disadvantages of staying with your current lender, as well as tips to help you evaluate if it’s the right decision for you.

Advantages of Sticking with Your Existing Lender

1. No Legal or Valuation Fees

• Staying with your lender typically means avoiding legal, valuation, and arrangement fees that can come with switching lenders.
• A product transfer is a straightforward process, making it more convenient and cost-effective compared to remortgaging.

2. No New Affordability Check

• When staying with your lender, you usually don’t need to go through a new affordability check. This can be beneficial if your financial situation has changed (e.g., a lower income or increased debt), as it reduces the risk of being turned down.

3. Speed and Simplicity

• Since your lender already has your details, the process is often quicker, with less paperwork and fewer checks, making it more convenient than starting with a new lender.

4. Loyalty Offers

• Some lenders provide loyalty incentives for sticking with them, such as lower interest rates or exclusive deals. While this isn’t always the case, it’s worth asking if there are special offers available for existing customers.

5. Avoiding Early Repayment Charges (ERCs)

• If you’re within your fixed-rate period, switching lenders might result in early repayment charges. Sticking with your current lender can help you avoid these penalties.
  

Disadvantages of Sticking with Your Existing Lender

1. Not Always the Best Rates

• Your current lender may not offer the most competitive rates in the market. While staying is convenient, you could potentially save more by exploring other lenders who offer better deals.

2. Lack of Negotiation Power

• Your existing lender may not feel pressure to offer you the best deal, as they know many customers stay for convenience. On the other hand, new lenders often provide better incentives, like cashback or lower introductory rates, to attract new customers.

3. Limited Product Choices

• By staying, you’re limited to the products your current lender offers, which might not suit your needs. Other lenders may provide better options, such as more flexible overpayment terms or longer fixed-rate periods.

4. Overlooking Mortgage Reviews

• Sticking with your lender can lead to complacency, where you don’t regularly review your mortgage options. Over time, reviewing your mortgage deal ensures you’re getting the best possible rate and terms for your current financial situation.

When Sticking with Your Existing Lender Might Be the Best Option

1. If Your Finances Have Changed

• If your financial situation has worsened, such as a drop in income or a higher level of debt, remortgaging might be challenging. In this case, staying with your current lender, where an affordability check isn’t required, may be the best option.

2. If You’re Close to the End of Your Mortgage

• If your mortgage term is nearing its end, switching lenders might not offer significant savings after factoring in fees and the hassle. A product transfer could be more practical and economical.

3. If Your Loan-to-Value (LTV) Ratio Hasn’t Improved

• If your LTV ratio hasn’t improved significantly (e.g., house prices haven’t risen or you haven’t paid down much of your mortgage), other lenders may not offer better rates. In such cases, sticking with your lender might make the most sense.
  

When Remortgaging with a New Lender Might Be Better

1. If You Can Secure a Much Lower Rate

• If your LTV has improved or you find a better rate with another lender, switching could lead to long-term savings, even after fees are considered.

2. If You Need More Flexibility

• If you’re looking for features like overpayment flexibility, longer fixed-rate periods, or better terms overall, another lender might offer products that better meet your needs.

3. If Your Financial Situation Has Improved

• If your credit score, income, or overall financial position has improved since you first took out the mortgage, you may now qualify for better rates and terms, making remortgaging a smart move.

Ultimately, the right decision depends on your personal financial situation and the deals available in the market. While sticking with your lender might be simpler, you could save more by exploring other options. Comparing offers from both your current lender and new lenders is essential to making an informed decision.

Working with a mortgage broker can help you navigate the market, giving you access to a wider range of deals and ensuring you find the most competitive rate. At MAPIO Financial, we’re here to help you assess your options and secure the best possible deal for your needs. Contact us today for expert advice.

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