How Does Remortgaging Work?

For most people, a mortgage is the largest financial commitment they will ever sign up for. Typically, it will last for a number of years, if not a number of decades. During this time, your circumstances are likely to change, meaning your mortgage may no longer be the best mortgage rate available to you. If this is the case, it doesn’t mean you have to stick with an unsuitable mortgage that’s costing you more than needs be. Instead, you can remortgage for more information click here.  

What is Remortgaging?

Remortgaging is the process of changing your current mortgage into a new deal. This can either be with the same lender or with a completely different one. Many people will look at remortgaging when the introductory offer on their mortgage expires and they’re placed on a higher rate. At this point, it’s worth comparing the cost of remortgaging versus the amount of money you could save with a different mortgage deal. 

Things to Remember When Remortgaging

Before you decide to remortgage, there are some things that you need to consider. These include:

Exit fees. Your current mortgage lender will most likely charge an exit fee. This is meant to cover the administration work needed to close your account. The cost of the fee will be listed in your original mortgage offer document. Some mortgage providers may offer to cover your exit fees, as an incentive to remortgage with them. You can use the Annual Percentage Rate of Charge (APRC) to compare deals.

Early Repayment Charges. It is common for lenders to charge an early repayment charge (Erc) for the introductory period. This is normally the case for mortgages that have a fixed-rate or are tracker mortgages. For example, if you have a four-year fix, you will most likely be charged a fee if you get out of the deal during those initial four years. This isn’t a problem for short term fixes as your circumstances are unlikely to change drastically during such a short period of time, and if they do you don’t have long to wait before the fix expires. However, deals like a 10-year fix may charge you an early repayment penalty that is thousands and thousands of pounds. If that’s the case, you need to weigh up whether it’s more cost effective to stay with your current deal instead of remortgaging.

Arrangement fees. Not only will your old mortgage provider charge a fee, your new lender will probably charge for setting up your new mortgage. Because of all these fees, the mortgage with the lowest interest rate may not actually be the cheapest option. You’ll need to work out the actual total you’d be paying per mortgage offer, and then you’ll find the most cost-effective solution for your circumstances.

Your finances. Depending on the amount of equity you have in your home, you’ll qualify for different mortgages. For example, the best remortgage rates require you to have at least 25% equity in your property. Therefore, it may be worthwhile delaying the remortgaging process until you’ve made a couple more payments in order to qualify for better deals from lenders. Alternatively, you may be someone who has a lot of debt or has had difficulty paying debts in the past. If this is the case, you can still remortgage with bad credit, and may even find a more suitable rate that allows you to consolidate your debts and escape the fines you could be accruing from multiple lenders.

 The Remortgage Checklist

 In simple terms, here are the things you need to do when you’re looking to remortgage your property.

Check the value of your property. If it’s been a couple of years since you had a valuation of your property, the price may have significantly changed. This could be down to a number of factors, from any renovation work you’ve had done to the reputation of the neighbourhood, or simply because of inflation. To confirm the value of your property, lenders will request that you pay for a valuation survey. It will be cheaper than your initial mortgage valuation or may even be paid for by a new lender. In addition to sending out a valuator, lender may use data on websites like Zoopla. If your property is valued and you think it is too high or too low, you can contest the valuation and present evidence as to why you think the amount they’ve chosen is incorrect.

Find out how much of your mortgage you currently owe. When comparing different mortgage rates, you can make sure you get accurate quotes by inputting the amount you currently have outstanding on your mortgage. You can find this information on your mortgage statement. If you don’t have that to hand, you can request a redemption statement from your lender. The less you have outstanding on your current mortgage, the better the deals you will be offered by remortgaging lenders.

Choose what type of mortgage would be best for you. Depending on why you’re remortgaging, a different type of mortgage may be suitable for your circumstances. You could be remortgaging to consolidate debt, to get a better interest rate, or perhaps because you’re looking for more flexibility. Over time, you may even have found yourself in a better financial situation that when you took out your current mortgage, meaning you’re looking to remortgage to increase the monthly payments. If you’re unsure of where to begin with deciding the best type of mortgage for you, then get some advice. A qualified expert will be able to point you in the right direction.  

Compare mortgage deals. Check out price comparison websites like MoneySuperMarket and CompareTheMarket to find the best rates for your circumstances. These websites may take different factors into consideration when giving results, so it’s always worth checking out more than one comparison website.

Apply for your new mortgage. Once it’s been completed, your solicitor will arrange for your outstanding debt to be transferred over from your old mortgage to your new one.

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