How to Win with Remortgages

Mortgage lenders don't like it when borrowers switch mortgage lender to take advantage of lower rates. Why? Because lenders lose out on profits and you save! It's like everything else in life, who spends more for exactly the same product, when you can get it cheaper elsewhere?

As you've probably figured, the mortgage market is highly competitive. This is because lenders use price as their unique selling point. Whenever this happens, price competition ensues, encouraging borrowers to remortgage to find a cheaper deal.
 

To try and curb the problem of mortgage switching, some lenders raise their up-front charges whilst others improve their customer retention programs. In the remortgage market, the winner is always the lender with the best customer retention program, however, the practice of raising up front charges simply reduces the lenders market share. What lenders don't realize, of course, is that borrowers prefer incentives over punitive measures in exchange for their business. It's not really that  surprising when you think about it!

Here's an example; Mortgage company "A" currently offers a 3.89% two year fixed deal. On the face of it this looks like a great bargain, that is until you read the small print - the mortgage arrangement fee is not the market average of $500, it's a massive $1,499! If you write off the fee over two years at $749.50 per year, it's equivalent to an additional three quarters percent interest on a $100,000 mortgage.

So if you intend to remortgage, you should really do two things. Firstly, you should add the total costs of moving your mortgage. And remember to add in the valuation fee (typically $250 on a $100,000 mortgage), the arrangement fee (typically $500), maybe a booking fee ($50?), legal fees to switch the mortgage (usually around $350 on a $100,000 mortgage), plus the cost of any penalties you'll be charged to exit your existing mortgage.
 

Now contact your existing lender. Tell them you are considering moving your mortgage for a better deal. You must try and put pressure on them, otherwise they'll think you're bluffing and they'll sit tight and do nothing. After all, they know many customers simply just complain and never carry out their threats. So try and ruffle their feathers a bit and see whether they're prepared to do that little extra keep your business. Try writing. A strongly worded letter often gets results. If they offer you their standard variable rate, just walk away.

Once you've found a new deal and calculated the costs of moving (including getting your existing lender to quote for keeping your business) you'll be in a better position to deliver a judgment on your current lender.