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Remortgaging sounds complicated, how do I do it?

13th November 2018

What is a remortgage?

In short, a remortgage is taking out a new mortgage on a property you already own. This will either be to replace your existing mortgage, or to borrow money against your property. There are usually (but not always) solicitors involved as there are when you buy a property. However, some remortgage deals offer this service for free.

Reasons to remortgage

If you opted for a fixed rate mortgage and the fixed rate period is coming to an end, it is likely that your mortgage will now change to the standard variable rate. Often this is much higher than the rate that is ending. This is why many people change mortgage providers at this stage – to avoid paying a higher rate moving forward. Compared to the process involved in your original mortgage (particularly if this was your first home) the process of remortgaging can be significantly less stressful than when you first applied.

A Standard Variable Rate (SVR) is a type of variable rate that means your payments can go up or down according to changes in interest rates. The rate you pay on an SVR mortgage will be determined by your mortgage lender. An SVR does not track above the Bank of England Base Rate at a set percentage. So, if the Bank of England Base Rate went up by 1%, your lender may or may not follow suit. Lenders can in fact increase or decrease their SVR at any time, not only after Base Rate changes. In contrast, a tracker rate deal will rise and fall in line with Bank of England Interest rates.

As already mentioned, the main reason you might want to remortgage is to save money. Here are all of the main situations in which you may consider a new mortgage:

  •      Your current mortgage deal is about to expire
  •      You would like a better rate
  •      Your home’s value has changed (increased)
  •      You are concerned that interest rates may go up
  •      Your income or savings have increased

○      You would like to change from an interest-only mortgage to a repayment mortgage

○      You would like to overpay your mortgage but your current deal does not allow you to

  •      You would like to borrow more (for example, to cover work on your property)
  •      Your financial situation is due to change so you would like a more flexible mortgage

○      For example, so you can miss a payment at a specific stage or make extra payments. You may be changing jobs, going back into education, or travelling.

Before you switch, check out the costs. Some lenders offer fee-free deals but if they do not, you will have legal, valuation and administration costs to pay. You can use the Annual Percentage Rate of Charge (APRC) to help you compare deals. What might look like a money saving deal could end up losing you money if you do not do all of the right sums first.

What to consider before remortgaging

Your current mortgage deal should have been matched to your situation but the same terms may not be a good match to your situation anymore. A financial advisor can discuss this with you in order to establish the best possible options for you now. Questions to ask prior to choosing to remortgage include:

  •      Is your mortgage term still suitable?
  •      Are you earning more money?
  •      Would you like to bring the monthly costs down?
  •      Are there home improvements due that you need to borrow more money for?
  •      Are there any exit fees on your current deal?

The next step is to speak to an independent mortgage broker who can advise on the best option for you. A broker will not simply look at the interest rate. They will consider how much the mortgage will cost you including fees, valuation and solicitors. The ideal situation is that as soon as your fixed rate mortgage ends with your existing lender, your new mortgage will begin.

When can I remortgage my house?

Generally, lenders require that you have been paying your current mortgage for six months following the date of completion before you can remortgage.

The main reason for remortgaging is to save money. Although you are not guaranteed to save money, it is worth spending time to choose the best deal. You can save hundreds of pounds per month if you get it right. The process should begin with conversations with a mortgage professional to establish what it is you are looking for, what you can afford and what your priorities are.

Find out if you could save by remortgaging. Acting primarily as insurance and mortgage financial advisors, IMC has been successfully operating in the financial sector since 1996. Get in touch with our independent mortgage advice service today.

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