Many householders are opting to remortgage these days. This makes perfect sense considering some of the incredibly low mortgage interest rates available.
However, changing the provider of your mortgage involves quite a bit of research – as well as the ability to act fast. Many deals (especially the exceptionally good ones) are only available for a limited time.
To try and help, here’s some advice on how to remortgage your home.
What is a remortgage?
Remortgaging your home involves paying off your current mortgage by signing up to another deal.
This means leaving the original fixed or variable rate and signing up to a new mortgage product which is (hopefully) less expensive and more suited to your current circumstances.
Perhaps a new baby has made your finances a little precarious at the moment and you would welcome prefer the budgeting stability offered by a fixed rate mortgage. This way you’d know exactly what you’ll be paying each month for a given time.
In terms of how long it takes to get a remortgage, you’re looking at between one and two months.
Why remortgage your home?
Remortgaging your home can often be a good idea.
One of the best reasons to remortgage is because it can save a considerable sum of money by reducing your monthly mortgage payments.
However, it’s not quite as simple as changing to a better deal. Some mortgage lenders may have expensive penalties for repaying your mortgage early (which is effectively what you’re doing when you opt to go with another finance lender).
The most common reason people cite when remortgaging is because they are approaching the end of their current deal.
This could have been a fixed price deal for two years, for instance, which is about to switch to the lender’s higher standard variable rate. This rate is subject to economic circumstances, so if the Bank of England raises their interest rate, the cost of your mortgage will rise accordingly as your lender follows suit.
Another reason to remortgage is to release some equity from the property, which has arisen as a result of the property having increased in value.
Remortgaging is quite common for those wishing to release funds to build a new extension, or add a conservatory.
Getting help from an independent expert
Once you’ve decided you want to remortgage, it’s often a good idea to speak to someone who knows about the market.
Not only will they know the best deals around, but also any potential pitfalls such as expensive arrangement or valuation fees. A good independent mortgage adviser will know the best fit for you and will also hold your hand throughout the transaction.
An independent mortgage adviser isn’t ‘tied’ to any particular lending firm so shouldn’t be promoting a particular mortgage provider over others. However, it’s always worth asking around beforehand to check that they are as ‘independent’ as they claim to be.
If you’re feeling confident you can tie it up yourself, look through some of the many mortgage comparison sites on the internet.
Meanwhile, before signing up with another lender for a remortgage deal, it’s worth running the new offer past your current lender to see if they can either match it or offer something better.
How much does remortgaging cost?
The typical costs of remortgaging include:
- An exit fee (anything from £50 to £200).
- Application fees on the new mortgage, solicitor fee and valuation fee. Check what these are, as they can vary massively.
Also, it’s important to check whether your existing mortgage has an early redemption charge. These usually apply where you have taken a deal, such as a fixed or discounted mortgage product.
They are usually a percentage of the total mortgage value and can easily run into thousands of pounds, so make sure you read the small print.
Filling out the paperwork
The administrative work for a remortgage is similar to first time round in the sense that the new lender will carry out a credit check.
They will probably also want to see proof of earnings either via wage slip or at least three years of accounts for anyone who is self-employed. The lender may also wish to carry out a valuation of the property.
Just as nowadays it’s more difficult to meet the lending criteria for a first-time mortgage, it’s also tougher to get a remortgage. This which is why advice from an independent mortgage adviser can save you a lot of time and effort.
Finally, a solicitor is necessary to ensure the deal goes through and that your previous mortgage provider no longer has a charge on your property. Need a solicitor? Tell us what you need.
For a re-mortgage quote complete our mortgage requirements form and a professional mortgage adviser will get in touch.