How to remortgage: going direct vs using a broker
If you have recently come to the end of a fixed or discounted rate, or are about to, you have probably considered remortgaging to a new deal.
After all, depending on the rate you’re currently being charged, you could save a significant sum each month by switching to a cheaper homeloan. And you could protect yourself from future interest rate rises by locking into a secure fixed rate now before the Bank of England decides to hike rates.
But busy lives tend to get in the way of the best laid plans and it’s understandable that many people consider remortgaging but don’t get around to it. According to the Council of Mortgage Lenders remortgaging business fell 10% between April and May this year and has been relatively subdued for the last six years.
So what’s putting borrowers off?
Lack of motivation
Firstly, interest rates are currently at historic lows, so when your initial rate ends and you revert to your lender’s standard variable rate (SVR), your monthly repayments may still seem pretty manageable, which reduces the financial motivation to switch your deal.
Secondly, people often think remortgaging is a hassle and, let’s be honest, it can’t be completed in five minutes. In fact, with tougher new mortgage rules having been introduced last year, the process, even for remortgagors who are not buying a new house, can take longer than ever before.
But remortgaging could save you more money than you realise, and protect you from rising interest rates.
Ray Boulger, senior technical manager at John Charcol, thinks it is worth finding out if you could save money, even if you are paying what you deem to be a reasonable rate of interest. He explains: “If you are on an SVR of 5% it will almost certainly be worth checking out your options and, even if you are paying 4%, it could be worth taking advice.”
But where should you go for a remortgage? Direct to a lender or through a mortgage broker? And do you have to visit these people in a branch or office or can you sort out a remortgage online or over the phone?
In fact, you can remortgage in whatever way best suits your needs, preferences and circumstances.
Direct or broker?
One of your first decisions should be whether or not you want to apply for a new deal directly with a lender, or via a mortgage adviser. If you go to a lender directly you can get professional mortgage advice, but the lender can only advise you on the most suitable deals it has from its own range of products.
Even so, going to your existing lender is a useful first step, to see what they can offer you. If you are not happy with that, check out some alternatives and get in touch with the lenders see if the deals would be accessible to you.
This will all depend on the level of equity you have in your home and your specific financial circumstances. Don’t assume you can get every deal you see advertised.
If you are not confident about this process the other option is to use a mortgage adviser. A broker will look at your current deal, your financial circumstances and your attitude to risk and search the whole mortgage market to find the most suitable deal for you.
Then they will fill in the forms and apply to the lender on your behalf, answering any queries they have and smoothing the mortgage process while pushing it along. So not only do you get the benefit of their expertise and advice, they also do the legwork for you.
Can I get the same products?
Many mortgage lenders offer their deals both directly to customers and through mortgage advisers, so you are able to access broadly similar products whichever route you take. But there is a catch.
A significant number of lenders only sell their products via mortgage intermediaries, while a handful, such as Yorkshire Building Society and First Direct only sell directly to consumers. Others operate different brands, or product ranges, for each route – one for customers who approach them directly and another for mortgage brokers.
Carmel McCarthy, spokesperson for the Post Office, explains: “We have a multi-channel strategy, meaning that we operate in the intermediary, direct, online and contact centre channels. We operate in a range of channels because there is demand for our products from customers in each of them, so it makes sense for us.”
Which is cheapest?
Because all lenders choose to distribute their products differently, there is some debate about whether the best products are available directly from lenders or via brokers. And there is no easy answer.
In the last 15 years the pendulum has swung from a time when brokers had access to the best mortgages to more recently when lenders reserved their cheapest deals for borrowers who come to them directly. It’s settled somewhere closer to the centre in the current market, although the very cheapest rates are often still offered directly to customers, not through brokers. But, be warned, these deals are not always easy to get hold of.
Boulger says: “Direct-only lenders do offer very good rates but the criteria are extremely strict, so many customers are attracted by these headline rates only to find they have their application declined after a sometimes lengthy application process.”
The mortgage market is highly competitive and you should be able to find a suitable deal whether you do it yourself or use a broker. However, if you have any unusual circumstances, such as previous credit problems, or if you are self-employed, you could be better off going via a mortgage broker who deals with niche lenders that design products for those who don’t fit mainstream criteria.
It’s your mortgage and if you want to switch it, it’s your choice as to which channel you use – direct or via an adviser. Both lenders and brokers try to make the process as easy as possible, so ask some questions and get an expert to do the sums for you.
Access all areas
You need to choose whether you want face-to-face advice, telephone advice or to make your own decision online with no advice at all.
Face to face: You can speak with an adviser in a bank or building society branch, or with a mortgage broker in their office. The benefit of face-to-face advice is that it feels more personal, which is reassuring to those customers who may not be confident about mortgages, perhaps because it’s been a while since they took out their last deal.
Telephone: This is an increasingly popular option for those who cannot get to a lender’s branch or who prefer not to. In addition the opening hours of lenders’ call centres tend to be longer than their branch opening hours, so it’s often more convenient. You still get the experience of talking through your options with a lender adviser or mortgage broker, but from the comfort of your home or office.
Online: Some borrowers, in particular those remortgagors who are confident about what deal they want, prefer to go online to arrange a mortgage. Many mortgage lenders allow you to make an online application and send accompanying documents by post, and you can manage virtually the whole process online or via email. Or you can begin the application process online and then call up at any stage if you need further help.
Boulger believes that most borrowers are not comfortable with a wholly online process. “When we trialled an online mortgage service we realised that the vast majority of people picked up the phone to ask us a question at some point. In most cases we prefer to see people face to face because it is easier for them and us, but we also do a lot of mortgage interviews and fact finds over the phone.”