Remortgaging involves switching your current mortgage to a new deal, arranged either with an existing lender or a completely new lender. Today’s competitive market sees a lot of borrowers choosing to switch their mortgage (remortgage) every few years in order to take advantage of the new rates that are on offer.
Those that do remain on the same deal for the whole term of their loan could potentially be missing out on the potential benefits of remortgaging, not least the opportunity to reduce the total amount paid back. This could be a significant margin in some cases.
Many people are unaware of the benefits of remortgaging, so RM Mortgage Solutions want to ensure that you are aware – so that you can reap these benefits yourself!
If you’re paying your lender’s Standard Variable Rate (SVR), it is possible your existing lender will offer you a better rate and greater flexibility on other available products, thus allowing you to save money on your monthly repayments or to repay your mortgage sooner.
Again, if your current lender doesn’t offer better rates or greater flexibility on its other products, you may want to consider switching your mortgage to another lender, even if doing so would trigger early repayment charges payable to your existing lender, as this could still mean a net saving to you.
A higher income or rise in your property’s value means you have the ability to increase your mortgage to help pay for major outgoings rather than borrowing money separately. A remortgage may help.
AVOID MOVING HOME
It can be cheaper and more convenient to adapt or add an extension to your existing home, paid for by remortgaging or a further advance, than to move home.
Remortgaging can allow you to release some of the equity you hold in your home and allows you to consolidate other debts that you may need to, such as a car loan or credit cards, those of which can attract higher rates of interest than that of your mortgage.
Think carefully before securing other debts against your home
Change the length of your mortgage term – Due to the length of time that mortgages last it is fairly obvious that your circumstances are likely to change during the term. Some homeowners may want to take remortgage advice to pay their mortgage off quicker, for example, so that they can retire earlier. If you use your remortgaging advice to switch to a lower interest rate, while maintaining the same monthly payment that you have been used to, you could potentially reduce the term of your mortgage by several years. If money is tight, other homeowners may use the opportunity to increase the term of their mortgage in order to reduce their payments further.
Why not switch & save today!
How does remortgaging work?
As well as knowing the benefits of remortgaging, it is important to understand how it works and what steps you can take when you are going through the process.
Gather your paperwork
You should be thinking about a remortgage around three to six months prior to end of you current deal.
Gather your latest mortgage and bank statements together to identify the amount of money you are paying for your current mortgage, although if your deal is a tracker or another variable deal, it may have decreased in recent months, so you will want to check how much you were paying before the decline in rates.
Find out the cost of moving
Ensure you check the small print for any early redemption charge (ERC) especially on discounted, fixed, cash back or capped deals, which could make a remortgage too expensive.
Another thing to note would be the exit fee.
Maybe calling your lender to obtain a quote for paying off the amount you owe plus any other charges, and checking that the exit fee you are quoted matches the one featured on the mortgage agreement, as lenders are not allowed to push up these fees once you have signed up for a loan.
Be aware of the restrictions
Don’t assume that your ERC will automatically end simultaneously with your fixed or discount rate ends, as some loans have overhanging tie-ins.
You may find that you need to pay the lender’s standard variable rate (SVR) for a set period after the initial deal ends.
Find a mortgage you want
You need to decide on the type of product you want, for example, a fixed rate, tracker or variable rate, then track down the most appropriate deal for your circumstances.
If you’d prefer not to do all of the leg work on your own, you can use a mortgage broker but check that they offer Whole of Market advice.
Work out the involved fees
The deal you are planning to remortgage to may not come cheaply and you may need to pay legal fees, application / arrangement fees and a valuation fee.
Fee-free deals, where lenders pay for or refund legal and valuation costs, do exist although they usually come with a higher interest rate. A mortgage advisor will be able to work out for you which deal offers the best value over the term of the deal.
Apply for the new deal
Once you have found the most appropriate product for your circumstances, you’ll need to apply for the new deal you have found. You can generally do this around three months before your existing special offer rate expires.
It’s smart to start early as if you are turned down, you have a chance to look elsewhere.
If you have chosen to use the services of a mortgage broker, they will apply for the remortgage on your behalf, chase it through to completion and deal with any issues that arise along the way.
Your mortgage advisor or new lender should send you an agreement in principle based on the details you have provided, then the lender may commission a survey of your home to make sure they’re happy to accept it as security for the loan.
Once any fees are paid for and the lender’s survey is completed, your new lender will send you a remortgage offer and then the lender’s solicitor will deal directly with your current provider.
After that, you should receive a completion statement. The process will take at least a month – longer if you are borrowing extra when you switch.
A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.