It's time to ditch your mortgage

Who can -- and can't -- save money by switching their homeloan?

Life is all about timing and, for those trying to play interest rates to their advantage, it’s not just about getting the best deal on the market, but choosing when to move your financial products.

However, it’s well worth remembering that you are unlikely to consistently beat the market, since it will always do something unexpected -- just when you least expect it.

The fact is there are no rules when it comes to mortgages, no ‘best deals’ and certainly no best time to switch from one type of homeloan to another. It depends on you and your personal requirements.

Let’s be realistic though, we all want to think we have timed our mortgage moves to perfection. So below are some of the groups of borrowers who could be well placed to benefit from switching their mortgage now.

Of course, this is neither advice, nor is it appropriate to all mortgage borrowers. It depends entirely on your specific deal and your wider circumstances.

1. Paying a high SVR?

When faced with the choice of doing nothing and staying on your lender’s cheap standard variable rate (SVR) or going through the (perceived) hassle and expense of remortgaging, it’s little wonder there has been borrower apathy about switching. Indeed, some lenders still have tiny SVRs -- many Nationwide borrowers (though not all) are still paying just 2.5% for example.

But things are starting to change as not all SVRs are dirt cheap -- Kent Reliance Building Society’s is a whopping 6.08%. And now that many new mortgage deals have become more competitive than lender SVRs, remortgaging is more appealing again.

Related how-to guide

Cut your mortgage costs

Find out how to cut the cost of your mortgage by hundreds of pounds a month and become mortgage-free years earlier.

See the guide

Basically you need to look at the SVR you are paying and then look at what new mortgage rates are available to you, depending on the level of equity you have in your home. Make sure you also take into account any switching costs, such as an arrangement fee with your new lender.

With the current average SVR at 4.79% according to Moneyfacts, many borrowers will now be able to get a better deal by switching. For example, trackers now start at less than 2% and two-year fixed rates at less than 3%.

2. Plenty of equity?

If you have a lot of equity in your property (and are not tied into your current deal), you are likely to be able to make a significant saving from switching (OK, unless you are with Nationwide or on a particularly cheap long-term rate!).

This is because the best deals are still reserved for those with a large amount of equity -- 25% or even 40%. Not only are you deemed lower risk by lenders because of your massive equity buffer, you are also much cheaper for them to lend money to than those borrowers with just a small deposit. Under regulatory rules, lenders typically have to hold six to eight times as much capital for a 90% LTV mortgage than for a loan with at less than 60% LTV, according to the Council of Mortgage Lenders. So it’s no wonder that they need to charge higher rates to those with a small deposit!

The greater your equity, the greater the chance that you could save money by switching because you will have your pick of the best deals available.

3. Can’t afford for your rate to rocket?

It’s unlikely that interest rates will rocket this year, and beyond that is anyone’s guess. But some borrowers cannot afford to take the chance as they need to know that their pay rate is guaranteed for a set period.

John Fitzsimons looks at how you can save money by selling your home yourself online

Perhaps they are starting a family or they know that their budget will be tight for the coming few years.

For anyone who wants to guarantee their monthly repayments for a set period there is only one way, and that’s to get a fixed rate mortgage. Sitting on your lender’s SVR may be cheaper now, and it could end up being cheaper over the next few years, as there is still a pretty chunky gap between variable rates and fixed rate mortgages.

But if you cannot risk your rate rising significantly, switching to a fix is a good option.

And with best buy two-year deals at less than 3% and five-year fixes at under 4.5%, now is a great time to lock into a deal.

The inbetweeners

There are some borrowers who may be unsure whether or not it is worth remortgaging.

Perhaps you are paying a high SVR but your equity level is fairly low, so you are unsure what mortgages are available to you?

Maybe you think your current rate is actually pretty competitive but would like to know what else is about?

Or perhaps you are tied into a fixed rate with Early Repayment Charges and are unsure how these would impact on any potential savings you could make?

If you don’t know whether or not you could save money by switching you could benefit from the help of an independent mortgage broker.

Sticking put

Finally there are a few borrowers who are likely to be better off staying where they are.

Those in negative equity or with equity of less than 10% will probably be unable to find a new lender willing to accept them. However you may want to ask your existing lender if they will let you switch to another deal, such as a fixed rate, as some will offer existing borrowers this flexibility.

Also, if you are lucky enough to be one of the borrowers who took out a super-low term tracker rate, or reverted to a term tracker at a very narrow margin to Base Rate, you could be paying as little as Base Rate plus 0.5%. You are not going to beat this so staying put could be a good option, but remember you are still exposed to rising interest rates.

More: Find a competitive mortgage | An easy way to choose the right mortgage |The mortgage to kickstart the housing market