FURIOUS competition among lenders means there are plenty of attractive mortgage deals around at the moment. But if you are not planning to move house, are you left out of the party?

The answer is no - you can opt for a remortgage. You redeem your existing loan and take out a new one, usually with a better rate of interest.

If your property has appreciated in value since you took out your present mortgage, you can borrow anything up to its new value. Once the first debt is cleared, you can use the balance as you see fit - but remember that a bigger loan will have higher repayments.

A number of other factors must be taken into account to ensure you get the right deal.

Almost anyone paying the standard variable rate of 7.24% could save money by switching to a cheaper deal. Egg, for example, will charge a standard variable rate of 6.09% from November 22. Alternatively, you could choose a discounted mortgage, where the standard variable rate is reduced for a limited period. Abbey National is offering a 1.9% discount for two years at 5.34%. Nationwide's discount is 1.2% for two years, giving a rate of 5.5%.

If you expect further rises in interest rates and fancy the security of a fixed- rate loan, Leeds & Holbeck charges 5.49% fixed for two years, or 5.73% if you do not take out the lender's household insurance. You could try the Halifax with a rate of 6.39% fixed for five years.

With any special offer, it is important to steer clear of loans that have extended penalties that lock you in after the discount or fixed period has ended. The deals mentioned here are free of such lock-in clauses.

2. How much can I save by switching lenders?

It depends on your current mortgage payments and the deal you choose. On a £100,000 interest-only loan, a borrower paying 7.24% could save £212.50 a month by remortgaging with Portman, which is offering a 1.9% discount on its standard variable rate of 6.59% until February 2001.

Your new lender will want to value your property and could charge a valuation fee of about £200 or more. Some levy an arrangement fee for setting up the loan of between £250 and £300. You might also incur legal costs of about £350 for new searches, deed fees and paperwork. A number of lenders, including Abbey National and Halifax, pay the fees involved in remortgaging on your behalf.

4. Does it matter if I have an endowment loan?

If you are simply taking out a new mortgage for the same amount, then your existing endowment should be adequate to clear the loan. However, if you are remortgaging for a higher amount, you will need to make extra provision.

Whatever you do, do not cash in (or surrender) your endowment and start a new one - you will almost certainly lose out in terms of investment return. Keep the old policy going and arrange to repay the additional amount you have borrowed as a repayment loan - you pay both capital and interest to the lender each month.

5. What if I am trapped by redemption penalties?

Before you switch your mortgage, you should check whether you are liable for any penalties. Some lenders charge a redemption fee if you switch within the fixed or discounted period of the home loan. Others lock you in to the standard variable rate for up to four years after the special deal has expired.

The system for calculating redemption penalties also varies from lender to lender. Your mortgage company or broker will tell you how much you will have to pay as a redemption fee. These costs should be set against the expected savings to see whether it is worth going ahead with the remortgage.

6. Are fixed rates the best option?

A fixed-rate mortgage is good value if the standard variable rate rises above the level of the fix. In other words, if your fixed rate remains higher than the variable rate, you are losing out. Variable rates have just edged upwards, which has added to the potential allure of a fix. However, you need to take a longer-term view on how you think rates will move in future.

There are some attractive fixed-rate deals on the market. Portman has a mortgage at 6.49% fixed until February 2002. There are no redemption penalties, which gives the flexibility to switch to a better deal if variable rates go down. Halifax is offering a five-year fix of 6.39%, but penalties apply within the fixed period.

7. Are there competitive deals on offer?

Lenders are desperate for your business and often use lower rates to entice remortgage customers. They will often pick up the bill for legal and valuation fees as well. For example, National Counties building society is offering a three-year discount of 1.2% off its standard rate of 6.59%, giving a payable rate of 5.39%. The society will also pay all your fees. On a £100,000 mortgage you would save £1,850 a year on the 7.24% rate, or more than £5,500 over the three years.

8. What if I don't want to leave my existing lender?

If you have a good relationship with your lender, you may be able to negotiate a better deal - they will certainly not want to lose your business. Remember that if you switch to another deal with the same lender, you may still be liable for redemption penalties.

9. Do I have to buy extra life insurance?

If you are increasing your mortgage to take advantage of the rise in the value of your property, you should certainly look at taking out some extra cover. In fact, always make sure you have at least as much life assurance as you owe - then if you die it will clear the debt.

At the moment, premiums for basic life insurance are falling, so it might pay to switch policies anyway. But this only applies to term cover, which has no investment element. Go to a broker for a comparative quotation to see whether your current deal is competitive.

If you have an endowment mortgage the policy has life insurance built in. If you increase the debt there will be a shortfall in the level of life cover (as well as investment provision).

Do not plug this gap with a replacement or additional endowment. A straightforward repayment mortgage will take care of the extra repayments, while a term-assurance policy will cover the loan in case you die before the debt is paid.

10. What if I am thinking of moving shortly?

When you remortgage, check that the new deal is portable. Some loans are linked to a specific property, which means you might incur redemption penalties if you move - even to a property that is the same price.

If you have a portable mortgage, you can take it to a new property and save yourself the expense of refinancing.

Switching for a better deal

JOHN and Mary Hunt live in a four-bedroom converted barn in Ifield Wood, West Sussex. They have already remortgaged once and have just applied to switch to another lender. At the moment, they have a standard variable rate loan with Direct Line at 6.35%. There are no redemption penalties, so they have decided to move to a cheaper deal. The Hunts were disappointed with the alternatives available from Direct Line and approached London & Country Mortgages, an independent broker, for advice. John says: 'We did not want to pay to switch - and we did not want to move to a mortgage that carried redemption penalties.' They have chosen a home loan from National Counties, capped at 6.59% with a 1.2% discount for three years - the current rate is 5.39%. The building society pays all the fees involved in remortgaging. The Hunts will save about £2,200 a year on their £150,000 mortgage with the new deal. But instead of paying a lower mortgage rate each month, they have decided to reduce the length of their mortgage term from 22 to 20 years. Hunt says: 'We are delighted with the new loan. It includes everything we are looking for.'

Sunday Times 14 Nov 1999