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Ask Habito: all you need to know about life insurance

In the event of an unexpected death, it’s crucial to make proper financial provision to soften the blow for those you leave behind. It’s all too easy to convince yourself that day-to-day life is complicated enough without having to worry about who’s going to settle next month’s mortgage or gas bill payment after you’ve gone.

We believe that future-proofing the family finances doesn’t have to be expensive or stressful. That’s why we have launched Habito Life Insurance: a super fast, easy, and non-intrusive life insurance policy woven directly into the mortgage journey. So you can stop worrying about the future and get on with enjoying the here and now.

What is a life insurance policy?

Life insurance policies are designed to pay out a set amount of money to your dependants in the event of your death, usually as a lump sum. You pay a monthly ‘premium’ – a payment to the insurance company, and in return you get peace of mind that your family will be looked after financially if anything should happen to you.

The majority of life insurance policies are term policies, which means they run for a fixed number of years (perhaps 20 or 30) and will only pay out if you die within that time. This makes them ideal insurance to cover a mortgage or the cost of raising kids, as you can set the finish date to coincide with your final loan payment or the kids (hopefully) leaving home. There are two main types of term policies: level and decreasing.

A level term policy is a popular way to cover interest-only mortgages. A level term policy is one where the level of cover is guaranteed to be the same for a given period of years. The most common terms are 10, 15, 20, 25 and 30 years.

A decreasing term policy is a popular way to cover repayment mortgages. How does this work? The amount insured on your policy follows your mortgage debt as it decreases over the years, until both reach zero at the same time. This means the policy will always cover the outstanding mortgage, but the monthly premiums will generally be lower than a level term or whole of life policy. However, this policy isn’t suitable for an interest-only mortgage where the capital debt has to be paid off in one lump sum at the end of the loan term.

Alternatively, if you’d prefer a policy that’s guaranteed to pay out regardless of when you die, you can take out a whole of life policy with no end date attached. The hitch? The monthly premiums will be considerably higher than a term policy.

What things can affect my premium?

Age, health, lifestyle and occupation all play key roles in determining your risk rating in the eyes of life insurance providers, and consequently how much they want to charge you each month. That’s why a hard-drinking 55-year-old smoker who works on an oil rig will have to pay an awful lot more than a teetotal 25-year-old who works in an office – you don’t need to be an insurance mastermind to work out which one’s more likely to require a payout.

Whatever your risk rating though, don’t be tempted to lie on the application form. When it comes to life insurance, bad habits are best out in the open. Your premiums will be more expensive as a result, but you won’t leave loved ones without financial support when the insurance company finds out you didn’t tell the truth and refuses to pay out.

Do I need life insurance?

Having the security blanket of a life insurance policy can make a great deal of sense, especially when premiums start from as little as a few pence a day. But this doesn’t apply to everyone. For instance, if you’re young and single without any dependants relying on your salary to cover the mortgage payments and weekly shop, then you’re probably better off saving for a rainy day. After all, who’s going to be left to enjoy the payout when you’re gone?

To work out whether life insurance is right for you at this stage, you need to ask yourself whether your nearest and dearest would be able to cope financially if you passed away. For instance, could they still afford the monthly mortgage payments and day-to-day expenditures of running a home and looking after a family without your salary coming in? Or would they struggle to make ends meet? The same question still applies if you’re a stay-at-home parent – life insurance could help cover the childcare and housekeeping costs if you’re no longer around.

If the answer is they’d struggle, then the next thing is to use a life insurance calculator to work out the right amount to cover yourself for. Set the payout too high and you could end up over-tightening your belt to pay needlessly inflated premiums. Set the payout too low and it’s a false economy – the whole point of life insurance is to provide security, so the last thing you want to do is leave your loved ones short-changed if you die.

Will I need to have a medical?

The answer to this depends on your personal health and lifestyle profile, as well as your provider. On most application forms, you’ll be asked about your sex, age, height and weight to determine your Body Mass Index. You’ll also be asked about your family medical history to see if there are any hereditary illnesses that could affect you later in life. Finally, you’ll have to declare any previous or existing medical issues and, of course, vices such as smoking or excessive drinking (even if you gave them up a few months ago).

If your profile flags up any warning signs, then most life insurance providers will ask you to undergo a more in-depth, face-to-face medical examination to establish just how much of a risk you are.

We have focused on making our application process as non-intrusive as possible. With a Habito policy we will ask for your GP details so that we can randomly sample a small proportion of our customers to verify medical information that has been given to us. This means that you don’t need to book doctor’s appointments or submit years of medical history. This will not affect your policy but it will help us better build our risk profile in the future.

How do I make a claim?

Having to search through mountains of paperwork when you’re recently bereaved only adds to the stress, so ideally the insured will have provided you with their life insurance policy details well before their death. That way, all you have to do is contact the insurer to let them know you want to make a claim. If you don’t know the details or can’t locate the policy document, you could check bank statements for any regular payments to an insurer or insurance broker, or contact the Association of British Insurers.

Life insurance providers do their best to make the claims process as stress-free as possible to avoid unnecessary upset for the bereaved, but there is certain information they will need to proceed further:

  • Name of the policyholder
  • Original death certificate 
  • Policy number
  • Your name, contact details and relationship to the policyholder 

They can then send you a claim form to complete along with details of which original documents you need to send them, including the death certificate (you can get multiple copies of this when you register the death). Once the insurer has received all the necessary documents and approved the claim, then payment can usually be made pretty swiftly.

Will my loved ones have to pay inheritance tax?

That depends on whether the policy was written ‘in trust’ or not. The insurance provider can tell you the answer to this. If your policy was written in trust, then the payout amount won’t be added to your estate and therefore can’t be liable for inheritance tax (IHT), which is charged at 40%. It also means that your loved ones will receive the payout quicker than if the policy isn’t in trust.

If the policy isn’t written in trust, the executors of the will must apply for probate. This is a legal process to confirm the executor’s right to deal with your estate, and this process can take months. Furthermore, the payout will be added to your estate, so will be subject to inheritance tax, meaning a potentially reduced payout for your loved ones.

You should speak with a financial adviser if you’d like to know more about inheritance tax.

Jargon Buster:

Policy: A policy is a legally-binding contract between the insurer and the policyholder, and details the exact terms and conditions of your life insurance cover. When you take out a policy, the insurer will provide you with a document outlining exactly what your life insurance includes and excludes.

Premium: The premium is the amount of money you pay your life insurance provider, either monthly or annually, in order to keep your policy active. Your premium can be affected by a range of different factors, including the amount and type of cover you need, your age, occupation, lifestyle and health.

Term: The term is the length of time you’d like your policy to last for, and you’ll need to specify this when you take out life insurance cover. You can choose anywhere from a fixed number of years (known as a term policy) to the rest of your life (known as a whole of life policy).

Term policy: A term policy is by far the most popular type of life insurance cover in the UK. It lasts for a fixed length of time, such as 25 years, and will only pay out the agreed lump sum if you die during that period. If you live beyond the end of the term, the cover lapses and you receive nothing.

Decreasing term policy: Decreasing term life insurance (or mortgage term life insurance) also only pays out a lump sum if you die during the fixed cover period, but the payout amount gradually decreases over time and premiums are lower as a result. It’s usually taken out to cover a specific debt such as a repayment mortgage in the event of your death and so it tracks your loan term.

Whole of life policy: A whole of life policy is more expensive than a term policy because there is no fixed timeframe attached. It’s guaranteed to pay out an agreed lump sum to your loved ones regardless of when you die, as long as you’re still paying the premiums (or you paid them up to the age stated in your policy).  

Medical: When you apply for life insurance, you’ll be quizzed about your health and lifestyle. Based on your answers, the insurer will then decide whether a more detailed medical examination is required to assess your application further. If you need a medical, the insurer will nominate a qualified doctor or nurse to carry out a full health check at no expense to you.

Probate: Probate is the legal process of dealing with someone’s estate – everything owned by the deceased, including money in a life insurance policy, property and personal possessions – when they die. The person (or persons) you nominate to deal with your estate and follow the instructions as laid out in your will is called your ‘executor’.

Habito Life Insurance is available exclusively to Habito customers. For more information about our life insurance offer, head here.

What will the interest rate rise mean for your mortgage?

Today, Thursday, 2nd August, the Bank of England have voted to raise official interest rates by 0.25 percentage points to 0.75%

The last rate rise was in November 2017, when rates rose from 0.25% to 0.5%.

Although this sounds low, roughly four million UK households on a standard variable or tracker rate mortgage, which rises and falls with the official rate, will see their monthly mortgage payments automatically go up by roughly £30 a month.

Today’s rate increase to 0.75% makes the base rate the highest it’s been since March 2009, when it was dropped following the financial crisis and recession.

Read on and find out how you can remortgage to future-proof your monthly payments from any further rate increases for years to come.

What a rate rise means for mortgages

A 0.25% increase sounds quite small, but when you apply it to mortgages, monthly payments start to look more expensive.

It’s particularly expensive if you are on your lender’s standard variable rate (SVR), or the rollover, or reversion rate, that you pay once your fixed rate term has expired.

For example, if you were on a 3.99% standard variable rate, your monthly payments on a 25-year £200,000 mortgage would be an extra £340 a year with a 0.25 percentage point rise. Remember – this happened last November – so if you’ve been on your SVR since then and, taking into account the rise of another 0.25 percentage points today, it will be costing you an additional £680 this year alone. That soon adds up!

If you don’t know whether you’re on an SVR you can find it on your latest mortgage statement or call your lender to confirm.

Isn’t a rate rise already accounted for?

Most lenders have already nudged up their rates in anticipation of today’s announcement. As Martin Lewis said in a recent article: “Less than a year ago the very cheapest two-year fixed [mortgage] was under 1%, the similar cheapest deal is now around 1.35%, and five-year deals are up a similar amount too.”

The good news is, that while lender’s prices have risen compared to a year ago, you can still get a two-year fixed that is very low in historical terms. Today, the average rate for a new mortgage is 2.09%, but two years ago it was 2.3%, five years ago it was 3.2% and in 2007 it was 6%.

With the base rate predicted to continue to go upwards, homeowners should act as soon as they are able, to lock in low monthly mortgage payments.

Aren’t I too late then?

No! Firstly, if you know you’re on your lender’s SVR then it makes sense to switch away as soon as possible as it is always more expensive than fixing.

If you’re coming to the end of your initial period in a couple of weeks and are looking to remortgage then you also aren’t too late to make savings. If more rate rises come, which economists predict they will, then lenders’ prices for new mortgage products will also move upwards. The key is to avoid going on to your lender’s SVR and fix a cheap deal as soon as you can. In this market, the longer you leave it, the more risk you run that prices will have continued to go up when you do come to remortgage off your SVR.

If you are already in the process of remortgaging with Habito, then just make sure we have all the necessary details to complete your application as soon as possible. If that means rummaging through files and folders to find employment documents and mortgage statements, now’s the time!

If you need more advice on what documents you’ll need to complete your remortgage, and where to find them, get in touch with one of our mortgage experts for some helpful advice. If you’re interested in reading more about how you can prepare yourself for the smoothest remortgage possible, have a look at our blog post detailing what documents you’ll need to make this happen.

If you’ve remortgaged recently to a fixed-rate deal, then don’t worry – your mortgage payments will stay the same for now, whatever decision the Bank makes.

Can I switch my fixed-rate mortgage early to get a better deal?

If you’re looking to remortgage but not for several months – then make sure you know exactly when your current deal expires and think about for how long you might want to fix it for to protect yourself in the future. In this market, generally speaking, the longer you can fix your rate for, the better. While a five-, seven- or ten-year fixed rate will mean higher monthly payments than a two-year deal, it will also guarantee protection from any further Bank of England rate rises until at least 2023.

With most mortgages you can get released early – but it’ll probably cost you a fair bit. The early repayment charge (ERC) that accompanies most fixed-rate mortgages can add up to thousands of pounds, so you need to do your sums carefully to work out whether cutting your losses and switching to a new longer-term fixed rate is worth it. Our expert advisers are always happy to take a look and tell you whether switching early makes sense or not. They can start helping you find your next mortgage up to four months before your existing deal finishes.

I’m new here, how can Habito help?

At Habito, we search 90 lenders and thousands of deals to find the right mortgage for you. We then manage your application from start to finish, doing all the heavy lifting for you. And best of all we’re completely free – so what are you waiting for? See if you could save by remortgaging today.

 

Dropping the F-Bomb: why we’re going ‘Free From’ bad language

By Daniel Hegarty, CEO and Founder of Habito

From today, we’re making a promise to rid ourselves of bad language and be a ‘free from’ mortgage broker.

It’s a term most of us have heard in the supermarket aisles, referring to food that has cut out allergens. For us, it means getting rid of other things that bring consumers out in hives: confusing industry jargon, complicated language, and endless acronyms. ‘Free From’ for Habito, means always writing in plain English, being clear and accessible in our advice and using terms that everyone understands, or explaining the ones they don’t, much better.

Communicating clearly means that all of us can make informed decisions and do what is best for us financially. Our research has shown the harm that badly worded contracts can do. We’ll be campaigning to simplify the outdated language used in mortgages so that everybody can understand every aspect of what they’re signing up for.

Why now? Habito was founded just over two years ago with a guiding principle to make the process of getting a mortgage less difficult.

One thing has become clear since we started and that is that millions of UK homeowners actively fear their mortgage. The process of getting one, or switching to a better one, seems so complicated, scary and confusing, that many would rather avoid it altogether.

Why are people afraid of mortgages? People are disengaged by the use of over-complicated language and industry jargon. SVR, fixed-term rates, introductory period, interest-only, capital repayment… the list goes on. No-one learns this in school. These aren’t words or phrases we use at any other time. They are unfamiliar and unapproachable. And it’s only natural to fear what we don’t know – it leaves us feeling vulnerable.

Complicated terms, industry legalese and endless jargon mean that many homeowners aren’t able to understand what they’re signing up to. We found that nearly half of homeowners only read a quarter or less of their terms and conditions of their mortgage before signing on the dotted line.

Not understanding what you are signing up to is stressful. More than a third of people say they have had sleepless nights or been distracted throughout the day because of the stress of needing to go through a financial contract.

More than headaches and insomnia, this costs homeowners dearly. More than half of homeowners say they think they’ve ended up paying for something they shouldn’t have because the language was too complicated, and they signed up for something they didn’t fully understand.

On top of this, Dr. Peter Backus, Senior Economics Lecturer at the University of Manchester, estimates that 55% of homeowners could be wasting nearly £300 a month, from not switching their mortgage.

So what are we actually doing? Earlier this year, we commissioned the University of Nottingham’s Linguistic Department (LiPP) to do a linguistic analysis of Habito.com. They did a full readability test to make sure our words are easy to understand and as a result, we’ve made some major changes.

We can only do so much, though, on our own. Buying a house is a huge financial commitment, which is why it’s also a major legal commitment between consumers and lenders. Habito is not a lender, so we can’t rewrite everyone else’s terms and conditions. But as the middleman, or as we like to think of it, the interpreter, we want to do better at translating it all.

Fundamentally, this comes down to us wanting to make people feel empowered when they make the biggest financial commitment of their lives. We don’t think you should need a degree to be able to read a financial contract.  

Homeowners agree. 95% of people say that the Government should regulate to make the language in financial contracts easier to understand. So, now that we’re on the path to getting our own house in order, we’re going to campaign for much bigger, industry-wide, changes too.

Today’s announcement is just the beginning.

Further Reading

Habito’s ‘Free From’ Infographic

Habito’s ‘Free From’ Jargon Top 10

When Can I Remortgage?

A remortgage – taking out a new mortgage on a property you already ready own, either by switching to a new lender or a new mortgage rate with your current lender, can save you a lot of money.

When? It all comes down to timing the remortgage to when your initial fixed-term mortgage rate ends (the initial low-rate period) and avoiding the standard-variable rate (a typically higher rate) that kicks in after the fixed-term ends.

So read on and find out all you need to know about when you should leave your current mortgage deal, when you should stay and how to find your new best deal.

When should I think about remortgaging?

Preparation is key when it comes to getting yourself remortgage-ready. You need to leave enough time to weigh up the pros and cons of all the current offers on the market, and get all that pesky paperwork done and dusted so that your shiny new fixed rate deal is ready to roll the day your current one runs out.

Why is this so important? Because once your introductory fixed rate comes to an end (usually between two and five years), you’ll automatically be switched on to the lender’s much higher standard variable rate – and your monthly payments will almost certainly go up as a result.

You should ideally start looking into all your available options at least three months before your current fixed rate expires (you won’t have to switch lenders the second you’re approved: once you successfully apply, you’ll receive a remortgage offer with an expiry date attached).

However, don’t give up hope of homeowner happiness if you’ve already slipped onto your standard variable rate, you can still remortgage!

How long does remortgaging take?

Chances are, when you start eyeing up all the best-buy remortgage deals, you’ll want to jump ship from your current deal as soon as you can. However, the process can be slow if complications crop up along the way, such as a vital piece of missing paperwork.

You remember all that information you had to dig out for your original mortgage application? You’ll need to do much the same this time round, so it’s worth hunting down all the relevant documents such as payslips, utility bills, ID and bank statements (you can find a full list here) in plenty of time.

You’ll also need to be clued up on your current mortgage:

  • Is it interest-only or repayment?
  • Is it fixed or variable rate?
  • How many years is the contract for?

You can find all of this out by checking your offer letter or asking your lender for a redemption statement.

The remortgage process can take as little as a month to complete, but applications will inevitably take a few weeks longer if you’re applying to switch lenders rather than simply moving to a new deal with your existing lender (officially known as a product transfer).

If you do decide to stay put to speed up the process, though, remember that you’ll have all the time in the world to count the cost if you were able to get a better deal by going elsewhere but didn’t.

The list below give you an idea of the timeline involved in finding and securing your remortgage deal:

  1. You get your property valued
  2. You submit your mortgage application
  3. Once your application is approved, you get a mortgage offer from the lender to confirm you’re ready to transfer your mortgage
    Once that’s done, the solicitor handles the transfer of deeds from one lender to another
  4. At completion, a letter is sent through for you to sign
  5. You receive a letter from the new lender confirming that your mortgage has been transferred and your new mortgage payment will be taken based on your requested date and account details

Should I remortgage before my current deal ends?

Even if you’re still locked into a two-, three- or five-year fixed rate contract, you can get out early. It’ll cost you, though, and chances are you’re best off staying put for now as the penalties for switching will probably outweigh the benefits.

The early repayment charge (ERC) that accompanies most fixed-rate mortgages is a penalty fee that kicks in if you want to remortgage with a different lender while you’re still in the initial tie-in period – and it can make splitting up from your current lender a costly move.

Let’s say you have a remaining loan of £100,000 and the ERC in your contract is currently 4%. If you wanted to leave your lender right now, you’d be landed with an extra fee of £4,000.

On the flip side, ERCs are worked out on a sliding scale – it might be 5% in Year 1, but only 1% in Year 5 – so you need to do your sums very carefully to work out whether cutting your losses and switching early will be worth it in the long run.

Is remortgaging worth the effort?

100% yes! UK consumers are currently losing out on an estimated £29 billion annually by sticking with the same mortgage year on year, so remortgaging at the right time is a no-brainer.

Add in the event of the Bank of England raising interest rates in the future, you could end up paying thousands of pounds extra each year by staying loyal to your current lender.

According to analysis from estate agent Savills, a 1% rate rise would add around £10 billion to the UK’s mortgage bill, so it’s more important than ever for homeowners to get the best deal they can on their mortgage.

How do I find the best remortgage deal?

Remortgaging can be a great way to reduce your monthly payments, but when you’re choosing a new deal it’s essential to weigh up all the various costs involved rather than just the hot headline rate.

There are several potential fees to factor in – both for paying off your old loan and setting up your new one – and it’s important to know how much they’ll all cost and whether they’ll apply to you.

On top of any exit fees for splitting from your existing lender, you’ll also need to factor in the cost of conveyancing fees, valuation fees and arrangement fees for your remortgage (although many deals will pick up the tab for some of these).

You should also check the remortgage doesn’t have a sky-high standard variable rate (SVR) in case you have difficulty remortgaging again next time round.

Getting approved for mortgages is much tougher than it used to be, so it’s worth being aware of the potential extra costs involved once your new fixed rate deal runs out.

To get an accurate overview of the remortgage market, you need to use a mortgage calculator that produces a personalised estimate, which includes all the costs you’ll pay – rather than a basic estimate that only uses tempting teaser rates.

After entering details about yourself and your financial situation into the calculator, you’ll receive a reliable, whole-of-market picture of how much you can realistically expect to borrow, and from whom. And then you can work out whether remortgaging now is right for you.

Should I switch to a new lender or stay put?

The advantages of sticking with the same lender for your remortgage are that you’ll almost certainly make savings on fees and time – there’ll potentially be less paperwork to complete, fewer fees to pay and a much faster turnaround.

But just like staying with the same energy or insurance provider, fuss-free doesn’t necessarily equate to financially sound, and staying put may not be the best deal for you in the long term as you’ll only have access to a handful of deals from one lender.

As with anything, it’s important to do your research thoroughly and shop around for the best deal for you – which may end up being with your original lender or someone completely different.

By using a fee-free, online mortgage broker such as Habito, who scans every mortgage in the UK, do the legwork for you means you’ll not only save on money, time, stress and paperwork, but you’ll also have the whole of the remortgage market at your fingertips.

Habito partners with Starling Bank

Last month, we announced a new partnership with Starling, the UK challenger bank that offers a mobile-only current account.

This collaboration is part of Starling’s Marketplace, which is putting customers at the centre of a wider financial ecosystem. With Marketplace, customers are able to choose a range of digital products and services from financial companies that are integrated with Starling, giving them control of their money like never before.

We are really excited to be able to offer Starling’s customers the best mortgage advice, seamlessly, via the app from today. If you already have a Starling Bank account, you’ll find us in the Marketplace tab, where you can check the status of your Habito mortgage application and link straight out to your dashboard to pick up the process. And, we have big plans to take our partnership further – including being able to show you where and when you are able to save money on your mortgage.

Habito in the Starling Marketplace

Starling Bank offers their customers ultimate clarity and control over their current account, and we at Habito share the same vision and values when it comes to mortgages. Our partnership will allow Starling customers to have the best experience, getting Habito’s honest, free and straight-forward mortgage advice delivered where it suits them most.

Head over to the Starling Bank Marketplace to find out more and start getting smarter with your money!

Should I Remortgage With the Same Lender or Switch?

Whether you’re on the hunt for a better interest rate, need more payment flexibility or want to release some extra cash to finish off that loft conversion, remortgaging can make huge financial sense and possibly save you thousands – yes, thousands – of pounds a year. But should you remortgage with the same lender?

None of us like to pay over the odds – whether it’s for car insurance, the weekly grocery shop or the monthly mortgage bill. But the truth is that some two million Brits are overpaying on their lender’s SVR (standard variable rate). What’s an SVR? Basically, it’s the bog-standard interest rate your lender shifts you to when your initial fixed-term teaser rate expires – and being stuck on it is pretty much the same as throwing money down the drain.

With interest rates set to rise further over the next couple of years, it’s more important than ever to check if you could save some cash by remortgaging to a new fixed-term deal. Don’t think it’s worth the hassle? Think again – it really isn’t that much hassle, especially when you have the experts at Habito helping you out, and the savings can be seriously significant. We’re talking week-in-the-sun, new-flatscreen-TV significant! In fact, the only question you should be asking is whether it makes more sense to remortgage with the lender you’re already with or take advantage of a better deal elsewhere. So read on as we explain the pros and cons of staying put or switching.

Should I Remortgage with the same lender or should I switch?

The answer to this depends on all sorts of things, from what exit fees are involved to how healthy your credit rating is. But one thing it definitely doesn’t depend on is loyalty. Staying loyal to your partner, pet or favourite footie team is usually worth the effort. Staying loyal to your mortgage lender usually isn’t – what we call the ‘mortgage loyalty penalty’ costs the nation an estimated £29 billion every year in excessive mortgage payments. You’re free to take your mortgage elsewhere when your fixed term comes to an end (usually two to five years), so do your research and work out whether it’s a better deal to stay or switch. But whatever you do, don’t do nothing.


STAY  You can skip the fees

When you remortgage with a new lender, you need a conveyancer (a solicitor who specialises in property law) to sort out the paperwork involved in swapping over your outstanding loan. You’ll also need to get a current valuation and probably have to pay an exit fee for jumping ship from your existing lender. In other words, switching to a better deal elsewhere usually means a degree of financial and logistical pain for your remortgage gain (although many deals pick up the tab for some of these fees).

However, things are different if you simply want to move to a new mortgage deal with your existing lender. This is officially known as a product transfer, but it could just as easily be called a minimum fuss remortgage. Why? Because your biggest reward for staying put is a fee-free, hassle-free switch. No extra legal paperwork, no new valuation and, as you’re not actually going anywhere, no exit fee either.

STAY You can save time

You may be in a mad rush to remortgage, but all that extra paperwork means switching to a new lender can take a fair amount of time – ideally you need to start looking into the available options roughly 4 weeks to three months before your current rate expires.

On the other hand, pick a no-fuss product transfer with your current lender and you could be remortgaged to a new deal in the time it takes to say: ‘Why did we stay on that dreaded SVR rate for so long?’. Just remember, though: you’ll have all the time in the world to count the cost if you could have got a better deal by going elsewhere.

STAY – You’re already a trusted borrower

Just because you were approved for a mortgage a few years ago, there’s no guarantee you’ll get a remortgage with a new lender. They’ll carry out a fresh credit check, and if your circumstances have changed then you may not match their affordability criteria. Maybe you’ve been made redundant, switched to being self-employed or you’re currently on maternity/paternity leave – major changes such as these can make securing a new remortgage deal trickier.

However, your current lender doesn’t have to perform a credit check when you remortgage, as long as you’re not borrowing more money or making major changes – after all, they already know whether you can make the monthly payments or not. Obviously this can be a real bonus if your affordability rating has taken a bit of a knock recently. Beware, though, this isn’t a blanket rule – some lenders still carry out credit checks on existing customers to be on the safe side, so double-check the fine print.


SWITCH – You can access the best deals

Stick with the same lender and you’re only going to be able to access their deals, which is just a tiny fraction of the overall remortgage market. Even worse, as an existing customer you might not even be able to take advantage of all their shiny ‘new customer’ deals either.

There’s a whole world of discounted rates and juicy incentives out there, so even if your existing lender is offering a good deal you’d be mad not to compare it with what else is on offer. The easiest way to do this is via an online broker such as Habito. We search far and wide – more than 20,000 mortgages and 90 lenders – to bring you the very best deals out there. And we’re free, so no more dreaded fees to add to the spreadsheet.

Another problem with sticking with the same lender is that your property will probably get a drive-by valuation at best. Why does this matter? Because you won’t benefit if the market value has increased significantly and the LTV (loan to value) has changed as a result. LTV is the size of your mortgage as a percentage of the value of your property and works across pricing bands (95%, 90%, 85%, 80%, 75%, etc) – the lower your band when you apply for a remortgage, the wider your choice of deals will be.

SWITCH – You can make your loan more flexible

As well as saving you money, remortgaging with a new lender can give you increased flexibility over your finances. For instance, you might have had a windfall or promotion at work and want to start making overpayments to reduce your overall loan. Or you might want the option to take a payment holiday at some point in the future. Whichever mortgage bolt-on you’re after, chances are there’s a deal out there for you. But remember that increased flexibility will probably mean a slightly increased interest rate, so make sure your bolt-ons are going to be put to good use.

SWITCH – You’ll be welcomed with open arms

As 21st-century consumers we’re bombarded with incentive deals all the time, from BOGOFs to cuddly meerkats, and the remortgage market is no different. That’s great news for switchers as there’s a huge range of ‘golden hellos’ to pick from as a new customer – from free legal work to juicy cash-back offers. One word of warning, though: sometimes the rates on these deals are higher than the no-frills rates, so they could end up costing you more in the long run.


 

Ready to find the best remortgage deal for you? Our expert advisors can start helping you find your next mortgage up to four months before your existing deal finishes. We’re always happy to take a look and tell you if it would be worth switching early or waiting. You’ll only have to enter your details once and we’ll handle the rest for you when the time is right. You can start the process here or get a quote using our mortgage calculator here.

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