Guide to Remortgaging, when is a good time to Remortgage, the costs involved and the process.
Don’t forget the largest bill when you are trying to save money!
Millions of people every year have got to deal with this question which” is it worth Remortgaging”? A mortgage is probably the largest commitment you have so it’s sensible to stay on top of matters with regular remortgage reviews otherwise you may be losing money unnecessarily.
The recession has made a generation re-think their approach to finance. It is now common place to negotiate on mobile phone tariffs, satellite TV subscriptions and even shop about for different suppliers for utility bills and car insurance. The evolution of the internet has also honed minds on disparity of supermarket charges with homemakers surfing into the small hours to achieve the best price for a loaf of bread. This is a good thing and keeps inflation supressed in part. It also encourages enterprise to win your custom.
When Does My Mortgage Become Uncompetitive?
The Bank of England Base Rate has been at an ‘all time’ low since March 2009. This has kept introductory rates for new mortgages also cheap. If you have a mortgage that is directly linked to the Bank of England Base Rate the changes are your rate will remain excellent. However, there are a number of major banks that operate their own ‘variable’ rate after the initial benefit period and this is typically 4% to 5% and can normally be bettered easily by remortgaging.
Below is a table based on lender’s variable rates (current as at 16/5/2018), please check your individual existing Mortgage Offer to see if this rate applies.
What is involved in remortgaging?
It is normally most economical to remortgage after the initial benefit period. For instance, if you took out a two year fixed rate: then normally after two years. If your Remortgaging before this time period elapses then you will normally be charged for the privilege. Check your Mortgage Offer for the section on ‘early repayment charges’ for the exact terms that apply to you.
When should I look at Remortgaging?
Your ‘status’ will need to be approved by the new lender. If your circumstances are similar (or improved) since you took out the original mortgage then there is a very good chance you will be successful again.
What is at stake?
The existing lender should not be treated as life-long friends. They are in this to make money out of you. They thrive on your lethargy.
All of that running around you have been doing on other outgoings to trim them by £5 here and there could pale into insignificance as over the duration of a mortgage a lower rate could conceivably save you thousands.
And, if your remortgage application is turned down for whatever reason then you are no worse off (apart from any abortive set up charges). The existing lender will be happy for you to stay.
Cost to Remortgaging?
As mentioned previously the lender will need to approve your status. This will involve all aspects of a mortgage process. There is likely to be an administration charge by the new lender for setting the mortgage up. This can normally be added to the mortgage but if you do so you pay interest on it.
There will be a valuation cost and legal fees. With careful research these fees can normally be covered within the new lender’s remortgage package.
The existing lender will charge a nominal admin fee for closing your account if the early repayment charge period is over. The exact figures are normally detailed in the ‘fees’ and ‘early repayment charge’ sections of Mortgage Offer. They are normally entitled deeds release fee, sealing fee, closing account fee or redemption cost.
How do I find the best Remortgage for me?
You can of course use the internet or visit a building society. There are pitfalls in this approach as often you receive mountains of brochures / information but no advice. And, like all mortgages choosing the wrong one might result in less saving, unnecessary and damaging credit searches against your credit rating.
In my opinion if you want the best option open to you, and to not miss out, you are better off speaking to an independent mortgage broker who can access the whole of the market, such as Niche Advice Limited.
The mortgage broker will also be able to advise you on whether to fix your payments.
What can I spend the surplus money on after Remortgaging?
It’s entirely up to you. You might even what to keep your payments at the same level as before but overpay your new mortgage to pay it off quicker.
Can I raise additional capital by Remortgaging?
This will depend on the equity in your home and your affordability.
I want to raise additional capital when I remortgage – what reasons for the funds are acceptable when Remortgaging?
Most lenders will allow you to raise money to improve your home. Estimates and bills for the work untaken may be requested.
Some lenders will also allow you to consolidate personal debt such as credit cards and loans, or raise money to purchase additional properties.
For more information on remortgaging please call us on T: 020 7993 2044 or alternatively complete the online Contact form on this website.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.