Remortgaging
There can come a time when you outgrow your current mortgage simply because it isn’t cost effective or you’d like to raise more money against your home. In this case, you can remortgage your property to find a new, more suitable deal.
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Remortgaging to save money
It’s all about finding a mortgage with a better rate of interest. When you take out a new mortgage, you’ll typically receive an introductory deal, which will offer a fixed, discounted or tracker rate for the first few years of the mortgage, before reverting to the lender’s standard variable rate. These introductory deals typically last for between two and five years, after which point, you’ll normally be able to find a better deal elsewhere.
So, when your introductory period ends, use the annual percentage rate (APR) as a measure to compare your deal with the mortgages offered by other lenders. However, it’s important not to only look at the headline rate. You should also factor in the costs and fees associated with moving your mortgage elsewhere.
Remortgaging to raise money
You can use the monies from a remortgage to increase the value in your home and, as long as you can afford the new repayments, this can be an effective method of raising extra capital for home improvements. This type of remortgage is also commonly used to consolidate debts, but you should seek expert advice before you use a remortgage to do this.
Remortgaging to find a better mortgage
Sometimes a remortgage is the right thing to do because your circumstances have changed and your current mortgage is no longer the most appropriate mortgage for you. For example, you might be starting a family and want the predictability of a fixed-rate mortgage rather than a tracker. Alternatively, you might be earning more money and decide you want to make overpayments on the mortgage without a penalty.
How much does a remortgage cost?
A remortgage may offer you better value in the long run, but switching your mortgage provider can cost in excess of £1,000, so it’s essential you factor this into your calculations. The costs of remortgaging include:
- Your current lender’s fees – Check whether your current mortgage has an early repayment charge or exit fee as this will add to the costs of remortgaging.
- Fees charged by your new lender – You could be charged a number of fees, including a booking fee, reservation fee, valuation fee and a fee for releasing the funds.
- Legal fees – This will cover the cost of conveyancing work that may need to be done when refinancing your property.
In a lot of cases, your new lender will be willing to pay all or part of your current lender’s fees to help switch lenders; however, the cost of remortgaging is still a potential stumbling block.
How much could I borrow?
There are many factors that come into play when working out how much you will be able to borrow on a new mortgage: the value of your property, your income, how long you want to borrow for, and how long you have left to run on your current mortgage.
Want to know how much you could borrow, or what your monthly payments might be? With our handy mortgage calculator it’ll just take you 2 minutes to answer 4 simple questions and get an approximate quote. Give it a try now!
The remortgage application process
A remortgage will be taken out with a new lender, so you’ll have to go through the mortgage application process in full. You will have to show evidence of your income, such as payslips and bank statements, along with details of your outgoings, like credit card repayments, personal loans, utility bills and other household costs.
To check the affordability of the remortgage, lenders will also carry out a ‘stress test’, which is designed to see whether you could keep up with the repayments if interest rates were to rise.
Feel free to call us at any time to speak to a friendly, professional adviser. Or alternatively, visit a nearby branch to talk to an expert.
These calculators are great for getting a quick guide, but if you want a completely accurate assessment then you should talk to one of our professional advisers.
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