Remortgage

What exactly is remortgaging?

The definition of a remortgage is to repay your existing borrowing with one lender and take out a different mortgage with a new lender. An alternative is to stay with your current lender and take a product transfer.

As part of a mortgage review we would explore all the options and consider the possibility of a remortgage if it is beneficial to the client.

When is it a good time to remortgage?

There are many circumstances when you might remortgage, but the main one is when your current product is coming to an end. With our existing customers we set a review date about three months before the maturity of that product. We look at your circumstances to see if it’s beneficial to tweak that mortgage. Perhaps there’s a better rate available.

Other times that it can be worth exploring a remortgage is where your house has gone up in value a lot, if you’ve completed a big extension or your area has increased in value. This can benefit you because of a reduction in what we call Loan to Value. If the percentage that you’ve borrowed has dropped compared with the value of that property, lenders like that. The lower the Loan to Value, the better the rate.

Alternatively, perhaps you’re worried about interest rates going up if you’re on a variable product. You might choose a fixed rate deal in this situation. Another scenario is where you want to overpay the mortgage and your current lender doesn’t allow this. Or, if you need more flexibility in your mortgage we can look to move it to a more suitable product.

You may want to borrow more, perhaps for home improvements. We could look to remortgage to raise the capital to do that. One that is less encouraged but nonetheless appropriate for some clients is debt consolidation – where you have some unsecured borrowing and the best advice is to add the debt to your mortgage as a way of clearing it.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage

When is it not a good time to remortgage?

In a mortgage review with ourselves we would advise you whether it’s a good time or not. But some of the reasons why we might recommend against remortgaging might include:

The mortgage debt is really small. We might be able to save you something on the interest rate but on a small balance it won’t make a big difference to your monthly payments.

You have a large early repayment penalty. There are sometimes early repayment charges on a mortgage – sometimes that can offset the benefit we might get from a cheaper rate – you’re not going to earn it back over the period of the new product.

Your circumstances have changed for the worse. If you were to lose your job, your income is reduced or there’s new adverse credit on your file, it’s not usually a good time to look to change.

Property prices have fallen. If your home has dropped in value your Loan to Value will have increased. It could mean mortgage products can be more expensive as a result.

You don’t have much equity. If you haven’t owned your property for long and it hasn’t gone up in value much, it’s unlikely that there’s going to be a better deal out there.

What remortgage options are available?

There’s a whole host of different styles of products out there, but perhaps the biggest question is whether or not to fix your interest rate.

Do you want to know what you’re paying each month in the next period of your mortgage life, or are you happy to see your rates going up or down? There are products that allow you to fix your interest rates for a period of time while others, like discounted and tracker mortgages, move with interest rates.

The next option to consider is how long do you want the product benefit period to last. Say you went for a fixed rate – do you want to fix it for two, three or five years? That might relate to your life plans, such as starting a family, children starting school etc. That’s all factored into the advice we give you.

Another element is whether you’re happy to accept a redemption penalty or early repayment charges. Realistically, if you don’t accept an early repayment charge as part of your mortgage contract you won’t get a hugely competitive rate. But there are products out there that don’t have them. So if you were thinking about moving in the short term, then we may recommend this kind of product.

You might also want to consider borrowing more money, or decide to shorten or lengthen the term of the mortgage. If your income has gone up we might recommend you reduce your mortgage term from 25 years to 20, for example, and save on interest.

Why remortgage at the end of a fixed rate deal?

The reason that you took that fixed rate was probably because you wanted your payments to be stable. But when your product matures it will revert back to the lender’s Standard Variable Rate. Not only is this liable to change month to month, it’s more than you should be paying. Simple as that. So always look to review at the end of any product period.

What happens if I don’t remortgage after my deal expires?

Your payments are going to go up and potentially continue to rise should interest rates increase. So you won’t be on the most cost effective set-up for your circumstances.

How do I improve my chances of getting a good remortgage?

The best way is to make sure your house is in good order. So finish off any home improvements before the valuer comes out to look at it. Keep your credit score in good shape – make sure you’ve paid all your bills on time.

Any adverse issues on your credit score could hinder your remortgage. Something to consider is that numerous credit searches can also be detrimental to your score. You might go onto a comparison website for car insurance and find out that a credit search has been run on you – make sure there aren’t too many of these in the run up to your remortgage.

What fees are associated with a remortgage?

First there is a requirement for a survey which would normally attract a fee, then there are lender fees like a booking fee or an arrangement fee. You will also need a solicitor to move the mortgage across,  but because lenders are trying to secure business from one another at remortgage, surveys and legal fees are often free. It is sometimes worth taking a product at a higher rate that has no arrangement fees but the lower rates may attract product related arrangement fees.

With regard to using a broker, there’s no initial consultation fee for us to review your circumstances. There is a cost to our time and expertise, but this doesn’t become chargeable until the point of application. Our fees are calculated fairly and competitively based on the level of work we believe will be involved. That charge is also offset by the commission we receive from the mortgage provider.

So there are a few charges involved in a remortgage scenario, but the savings can be massive.

Your home may be repossessed if you do not keep up repayments on your mortgage.