What does it mean to switch mortgages? Why would someone want to switch? What can be gained from switching? Finally, if one wants to switch, how should they go about doing it?
The first question is easy to answer, though oftentimes “switching” can get conflated with “remortgaging.” Don’t be fooled; these refer to two different things that, while similar in concept, can have different implications for the borrower.
“Remortgaging” simply refers to getting a new mortgage to replace a previous one; this can be done with one’s existing lender or a new one.
“Switching” is the process of taking one’s existing mortgage and moving it to a new lender.
Now, for the next question: why would a borrower want to switch mortgages? There are a number of reasons for doing so. Firstly, a borrower might be dissatisfied with their current lender for one reason or another, like poor service or lack of responsiveness to inquiries. If borrowers think another lender will provide better service, tat would be a good reason for switching mortgages to said lender.
Another reason for switching would be lower total costs for the borrower. This can come in the form of lower rates or lower closing costs, varying from lender to lender or over time. It must be mentioned that breaking a mortgage with the previous lender will likely entail paying penalty fees. Hopefully, however, the money saved from switching will outweigh these fees. Borrowers should be mindful of how much they can save for what costs, to confirm that they really will save money and ensure that they get the best deal possible.
So, assuming one understands what it means to switch mortgages and determines that they want to do so, how do they actually go forward with it? Firstly, borrowers should notify their current lender and discuss with them what fees are associated with breaking their mortgage. Next, they will have to apply for a mortgage with their new lender; assuming one already has much of the required documentation from the previous mortgage on hand, this might not take too long at all. Next, they need just wait for pre-approval from the new lender; the time required for this will differ depending on the applicant and the lender.
To conclude, switching mortgages is not an overly complicated process, and there are many reasons to consider doing so. If borrowers are unhappy with lenders or can find better rates, then they might want to switch, so long as the costs don’t outweigh the benefits. Once they’ve reached a decision, all they need to do is notify their current lender and apply with a new one.