If you've already got a mortgage, and you've had it for a few years then it may be time to consider remortgaging. Perhaps you've had a mortgage for a long time and you're still on the standard variable rate that you began with, or you've been forced to revert to the variable rate because your fixed or discount period has come to an end. If so, then here's a little task for you.

Have a look for your current lender's website and browse through it. Most them now provide calculators which will enable you to punch in a few details so they can give you an up-to-date 'quote' for the sort of mortgage they might be prepared to give you on the basis of your earnings and their current rates. Pretend you're a brand new customer looking for your first ever mortgage. Enter the amount of your current mortgage (if you've paid off some of it, make sure it's what you've got left to pay) and the remaining term, and see what it churns out. Surprised? I bet you are! You're probably paying far more each month for an identical loan over the same period than a new customer would!

Many lenders also have a calculator for remortgages. These aren't for you - they're for new customers who might be thinking of switching over from their current lender. See what comes up when you enter your details in this particular calculator. Another surprise?

Does your current lender appear to favour new customers rather than you - the loyal one who's steadily been paying them huge wodges of money for more years than you care to remember?

With lenders fighting for new business, there's a huge range of mortgages on the market. Like it or not, if you're not taking advantage of them, then you will more than likely be subsidising them. So take advantage of it!

How to get started

The first thing to do is to decide what type of mortgage you want and do a bit of surfing on the Net to find a few lenders who offer what you're looking for. Put out a few tentative feelers to see if they would be happy to take you on just in case you decide to move your account.

Then comes the fun bit. You ring up your own lender and say something like: "Hello, I've got a mortgage with you that seems rather expensive so I've been thinking about moving to Mortgages R Us because they've got a rather good deal on offer at the moment."

With a bit of luck, your lender will cry: "Waaaaa! Boo Hoo! Don't leave us, purleeze! Sob!" and will offer you the opportunity of switching your mortgage to one of their cheaper products ie: the one you actually want. Strictly speaking this is not called a remortgage as your aim is simply to change the product you have with your current lender. And the verbal exchange above is obviously a simplification of your possible negotiating technique, but it seems to have worked for quite a number of people.

When the more Foolish among us started trying this a few years ago, the reaction was usually: "Er, Bye Bye, then". But you know what? People started walking. Mortgages lenders found they were losing customers because of their intransigence. And losing customers meant lower profits. Nowadays, many of them have departments specially set up to deal with current customers who are thinking of transferring to another lender, and they have the authority to offer these customers special deals on a case-by-case basis - especially to the long-standing customers. They're sometimes known as 'under-the-counter' deals and you can read an example of how one Fool did it here.

The trick is to sound knowledgeable about other lenders' products and to be quite determined that if they won't adapt in order to keep you as a customer, then you will walk.

Be careful of hidden costs

There are obviously some caveats to this procedure. You may, for example, be locked in to your current mortgage with heavy "redemption" penalties to pay should you move, which means they've got one up on you. So you will need to do a few sums to see if the savings you'll make are worth it.

Also, your current lender may demand a re-arrangement fee to change your account details. This can be in the region of £250 so, if you're in a strong position then it's probably a good idea to challenge this. "Er, excuse me! You want to charge me £250 to make me stay with you?" If they really think they're going to lose you, they might reduce or even waive the fee altogether.

However, the real benefit of staying with your current lender is that, really, you hardly have to do anything. There are little or no legal or valuation fees to contend with, as that was all paid for when you first bought the property. They simply draw up a new contract and you sign it. Apart from having a few fun phone calls with them, that's it! This makes staying with your current lender more efficient and means that they should be able to offer you a better deal than anyone else.

Of course, if they decide that they don't mind losing you then you will have to pursue your alternatives. If you switch to a new lender you will face the same sort of costs that you would if you were buying from scratch, apart from stamp duty. Not only will you have the usual legal and valuation fees - unless your new lender is trying to entice new customers by paying all that for you - but your old lender might charge you a 'closing down' fee. Of course, you might also have redemption penalties. But if it means you can save yourself hundreds, maybe even thousands each year overall, then changing your lender may well be worth the effort for the long-term savings. Generally speaking, however, it almost always makes sense to try to persuade your current lender to convert your mortgage to a different product.

Don't forget that you can also remortgage to release some of the equity in your home. Those of you who've benefited from the recent boom in property prices might want to consider raising cash for other purposes such as home improvements, a second home, a buy-to-let property, or even as a means of consolidating debts. It's possible to re-mortgage to release some of the equity but still pay the same monthly payments that you're paying now. Be careful, though. You need to think very carefully about things before increasing your mortgage. It's a clear aim of most people to reduce them!

Where Next?
• The Ghastly Endowment - Avoidance Alert
• Back to Homeowning Main Page