Even if you only have a few years left to pay out a mortgage or personal loan, switching lenders can save you a considerable amount of money. So, how do you get the best deal?
Do you consider yourself an attractive customer to potential lenders? If you have 20 per cent equity in your home and the income to cover repayments, then you’re in the driving seat when it comes to negotiating a better deal on your borrowing. But getting the best deal is not only about securing the best interest rate. Before you go shopping for a new loan, consider the following:
1. Does your loan ‘fit’?
If you’ve had your loan for a few years, chances are it may no longer suit your needs. Being able to make extra repayments, make your repayments more frequently or offset any savings which you have, can considerably reduce the term of your mortgage. Understanding which features you need your mortgage to have will help you compare products effectively.
2. What fees can you save?
With the ban on exit fees on new loans, fewer lenders are offering to waive the upfront costs such as application fees and valuation fees, as they can no longer recoup this money if you subsequently decide to move again. However, lenders are very keen to have your business, so negotiate hard on these fees. And don’t forget about ongoing costs such as annual fees and account-keeping fees. Ask to have these reduced, if not waived altogether.
3. Can your current lender do better?
Getting a better deal isn’t always about switching lender, especially if you have several accounts with the same institution. Find out what deals are around and then make an appointment to see your bank manager and ask if they can provide a better rate or if they will package all your loans together.
4. Think outside the high street
If you’re comfortable transacting over the internet, consider an online lender. Although the larger banks own many online lenders, they do have fewer overheads and will often offer competitive rates and fees to get your business. Being able to transact online also offers greater control and flexibility over your mortgage.
5. Let someone else do the legwork
Mortgage brokers have never been so busy. With so many lenders offering so many different products, a good mortgage broker is worth their weight in gold. After an initial meeting and understanding of your financial position, a broker will table a list of which lenders and products are most suitable. While brokers should not charge a fee, they will be paid commission by the financial institution which secures your business. A good broker should detail such commissions and request that you sign a disclosure document to certify that you have been advised of such arrangement.
If you think that you’re ready to make the move, or at least try and get a better deal from your current lender, you will need to be able to make a realistic comparison between loans. Using an online calculator will give you a good indication if there are savings to be made. To find out more, read Will switching save you money?