Remortgages

Remortgages: Why Should I Consider Remortgaging?

Your mortgage is probably your biggest monthly expenditure so it pays to shop around to ensure that you are on the best possible deal. Remortgages are typically an option when you are approaching the end of your current fixed, capped, or discounted rate period. When the promotional period on your mortgage ends you generally get switched to your lender’s standard variable rate (SVR), and you could see your monthly payments take quite a hike. An average borrower could end up paying hundreds of pounds a month more so it is well worth the effort of doing a bit of forward planning so that you have a new mortgage in place for when the time comes. As a rule of thumb you should start looking at remortgage options about 6-8 weeks before you want it to start.

You don’t necessarily have to be coming to the end of a fixed, capped, or discounted rate mortgage for a remortgage to make sense. It could simply be that interest rates are low (as they are now) and you want to move from a variable rate mortgage and fix your mortgage at a relatively low rate before interest rates start rising again.

Another reason for looking at remortgages is that you want to release some equity from your home in order to make improvements or extend it. Taking out a bigger mortgage to build an extension could be a much cheaper option than just moving to a bigger house if you need more space. Some people will also consider remortgages for debt consolidation reasons. They release some of the equity in their property to pay off loans or credit. This can make sense because mortgage rates are a lot lower than personal loan and credit card rates but do remember that if you are paying your mortgage back over a long period you could end up spending a lot more on interest – borrowing money at 10% over five years is cheaper than borrowing money at 5% over 20 years! So only do this if you are struggling to pay back your loans and credit cards in a reasonable time frame and you have the self discipline not to run up credit card debt again as it makes it pointless and the day of reckoning will come. As consolidating you debt in this way puts your home at risk if you fail to keep up repayments you need to be totally confident that you can afford the monthly payments.

Remortgages: How much does it cost to remortgage?

Arrangement fees on mortgages used to be quite reasonable or nonexistent but in recent years they have shot up and can now be anything up to 2% of the amount you wish to borrow. This can add to thousands. Lenders have wised up to the benefits of being featured in the best-buy tables so they keep their rates low while at the same time making sure they grab back what they can in their fees. This has made comparing mortgages quite difficult so it always best to speak to an FSA-authorised mortgage broker who will take not just the mortgage rates into account but also the arrangement fees, valuation fees, exit fees and legal fees to make sure you get the best deal possible.

Fees can generally be added to your mortgage, but again be aware that you will be paying this back possibly over 25 years so the interest will add up.

Finally, once you or your mortgage broker have sifted through all the various options out there it is always worth having a last word with your current lender to see if they can beat or match the deal you have been offered.

Remortgages: The Steps to Take

1. Contact your lender and ask for a quote to redeem your mortgage.
2. Make a short list of the most attractive deals you can find.
3. Go through them and add up all the associated fees.
4. Work out how much it will cost over the period of the deal including all fees and monthly repayments.
5. Work out how much your existing mortgage will cost over the same period and calculate what the saving will be.
6. When you have chosen apply to the lender either over the internet or on the phone.

If you are using a broker they will do most of the legwork for you although it could be beneficial to also check deals with the few lenders such as ING Direct who do not use brokers just to check they can’t come up with anything better than your broker can.

Let Find Mortgage Deals help you find the remortgage quote available to you. Our online form less than a minute to fill in after which you will be contacted by the most suitable independent FSA-approved mortgage broker who will help you get the best deal tailored to your personal requirements.