Remortgaging

Why Should I Remortgage?

There are a large number of reasons why remortgaging may be appropriate.

As most mortgage deals offered by lenders offer an initial deal (i.e. a fixed rate, tracker etc) that after a defined period of time (such as 2 years, 5 years etc.) reverts to a higher interest rate, it may be that the motivation for remortgaging is to simply obtain a new mortgage deal to ensure payments remain at an affordable level.

As most mortgage deals offered by lenders include an initial deal that reverts to a higher interest rate after a defined period of time, it may be that the motivation for remortgaging is to simply obtain a new mortgage deal – to ensure payments remain at an affordable level.

Additionally, remortgaging can also provide the perfect opportunity to make changes to your mortgage arrangements, such as:

• Raising funds (for carrying out home improvements or consolidating debts etc.)
• Changing the term (to pay the mortgage off quicker or to increase the term to result in more affordable payments)
• Adding or removing a party to the mortgage (buying out an ex-partner’s)

How to Remortgage

The remortgage process has been significantly streamlined in recent years. Once the applicant decides what they wish to achieve from their remortgage, and it has been established which lender it would be most appropriate to obtain the loan from, a formal application would then be made outlining the applicant’s circumstances and the details of the mortgage required. At this point in time, the lender will carry out checks to ensure the loan amount desired is affordable – taking into account a combination of the applicant’s income and committed expenditure. A credit check will also be carried out to give the lender the confidence that the borrower has a suitably robust credit history.

Once these steps have been successfully carried out, the lender will undertake a number of additional checks, such as assessing evidence of incomes (payslips, company accounts etc.) along with carrying out a valuation of the property in question. When all of these checks have been completed, the lender will then issue the mortgage offer, which is formal confirmation that the loan will be made following completion of the necessary legal work. This work is then carried out by a solicitor or conveyancer who is often (although not always) appointed by the lender.

What are the Main Costs to Remortgage?

There are a variety of potential costs that may be incurred, although in many situations these may not apply. The most significant costs which may occur are lender’s arrangement fees, valuation fees and the legal fees which a solicitor/conveyancer will charge for carrying out the required legal work. In many cases a lender will offer a remortgage product where the standard mortgage valuation and basic legal fees are covered by the lender. Additionally, whilst the lowest interest rates offered by the lender often incur an arrangement fee, it is only beneficial to proceed with a product with an arrangement fee if the reduced payments over the period of the deal offered (i.e. over a 2 year fixed rate) resulting in a larger saving than the arrangement fee itself. If this is not the case, it would be more appropriate to proceed with a rate offering a higher interest rate but either removing or reducing the size of the arrangement fee.

Are There Any Other Costs to Pay?

You may have fees to pay to your existing lender to repay the existing mortgage – such as administration fees or even an early repayment penalty. These penalties become payable if the mortgage is paid off before the initial deal (for example 2 years into a 3 year fixed rate) has expired. These are usually a percentage of the outstanding mortgage balance, so may be several thousands of pounds. As such, it is always of great importance to check the details of your existing mortgage deal first. Other fees payable are likely to be much smaller in nature, such as telegraphic transfer fees (the cost of electronically transferring money from one company to another), land registry costs etc.

Using a Mortgage Broker to Remortgage

There are multiple benefits to using a mortgage broker when arranging a remortgage.  Not only will a broker be able to find the lender most suited to your personal circumstances (taking into consideration factors like credit histories, affordability, lenders criteria etc.) they will also ensure the most appropriate deal is arranged. Whilst the lowest headline rates on offer can seem very attractive, the fees these may charge will only usually be justifiable for much larger mortgage balances. A broker will therefore take all of these factors into account and will often be able to find a deal that can save hundreds or even thousands of pounds.

Best Remortgage Deals

The best deal available will depend upon an individual’s circumstances, including credit histories, affordability, the level of equity in the property etc. Consideration would also need to be given to the level of fees charged, along with the type of deal that is desired such as a fixed rate, tracker etc. An adviser will take the time to understand a client’s circumstances and requirements in detail, to make sure that the right deal for the individual in question is arranged.