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How to move your mortgage to another bank or lender

Moving from one mortgage provider to another involves applying for and getting a new loan, then using that loan to repay your old one, so it can be discharged.

People switch lenders a lot more often these days, whether they’re buying a new home or refinancing an existing property. If you think your current mortgage lender is no longer offering the best deal or service, it may be time to assess your options. Although there are switching costs involved, it could save you money over time or free up income to make life a little more enjoyable. Before you dive in, here are some tips to help get your ducks in a row.

Reasons for switching banks or mortgage providers

Have things changed in your life since you set up your mortgage? Or has it been drifting on set-and-forget for a few years? It might be time to check if you still have the best mortgage arrangements for your current situation and future plans.

Here are some reasons you might move your mortgage to a new bank or lender:

  • For a lower interest rate
  • To take advantage of their incentives for new customers
  • To get a more flexible arrangement or more suitable banking services
  • To borrow more than your current lender will allow
  • To finance building or renovating
  • To consolidate other debts or finance

How much does it cost to switch banks?

Before making the call to change your mortgage provider, it pays to identify all the costs involved so you can check if it’s still worth doing. To help you get started, here are some potential costs to consider:

  • Early repayment charges if you’re switching mortgage lenders before the term of a fixed interest rate ends
  • Mortgage discharge fees from your current lender
  • Mortgage establishment or processing fees from your new lender
  • Lawyer fees for changing the registered mortgage details on your home’s legal title
  • Any cash or other incentives that came with your mortgage and might need to be repaid if you move
  • A registered valuation of your home if required by the new lender

Moving your banking to a new mortgage provider

If your new mortgage is with a bank, you may want to move all your other banking to them as well. You don’t have to, but it might help you get discounted everyday banking fees. It can also give you the option to include an offsetting mortgage in your home loan mix. Offsetting mortgages let you use money in linked bank accounts to effectively reduce the daily balance of your mortgage and pay less interest. To learn more see our article on what is an offset mortgage.

One of the downsides to moving your everyday banking and credit cards is changing all your automatic payments and direct debits to your new accounts. The good news is, most lenders will help new mortgage customers get this sorted.

What information does a new mortgage lender require?

Before switching to a new mortgage provider, it’s a good idea to revisit your income and expenses. This will let you know what you can afford and help show potential lenders you’re on top of your finances. You could also check your credit score and reduce other debt if you can. Refinancing your mortgage can be an opportunity to move other debts into your new home loan to pay less interest on all your debt.

Apart from ID documents, a new lender will typically want to see:

  • A budget showing your regular expenses and all debts, such as credit card balances, loans, hire purchase and child support
  • Evidence of your income, such as payslips or annual accounts if you’re self-employed

To help you prepare, see our handy:

Using a mortgage broker when switching banks or lenders

An experienced mortgage broker can check that your current mortgage arrangements are best suited to your needs and goals. They can also make it easier to find and negotiate the best deal with a new lender and help you sort the paperwork.

Although mortgage brokers are usually paid by the lender you move to, and not by you, it’s still a good idea to ask them about any potential fees before you sign up with them. For example, ask what happens if they work with you and bring you some deals but you decide you don’t want any of them. You should also ask what lenders they work with, to make sure you have the market covered.

When to tell your mortgage lender you’re moving to another

If you’ve had a bad service experience or frustrating time with your current lender, it can be tempting to tell them you’re taking your business elsewhere in the heat of the moment. Or you might secretly wait until you have a signed offer from a new mortgage provider and savour the moment you finally say goodbye to your old one.

However, it often pays to give your current lender a chance to put things right and come up with an offer that’s as good as you can get elsewhere. It could save all the costs and hassle of switching.

If you do decide to switch, your lawyer and the new lender will help you with the timing. Essentially your new mortgage is used to repay your old one, so it can be discharged. If you’re moving all your banking to the new lender, it can be a good idea to keep your old everyday account open until you’re sure all the automatic payments in and out have switched over to the new one.

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