7 Steps to Remortgaging
Remortgaging is often undertaken when you want to switch to another lender, this involves paying off your existing mortgage.
· Firstly, check the value of your current property, as often the value can increase. The greater the value, the better the deals available to you!
· Checking the market for mortgage deals is the starting point for comparing; what you’re currently paying against what you might get else where.
· Weigh up your options – whilst there may be lower rates available to you, consider the fees associated with remortgaging.
· Source a trusted mortgage adviser – comparison sites are good but they don’t include all mortgages! By speaking with a trusted financial advisor you can cross check independently the costs and benefits involved in remortgaging.
· Remember to review your mortgage annually. If you remortgage you may be eligible for an introductory deal on your interest rate.
2. Take advice
Taking advice from a mortgage advisor provides you with peace of mind that they will source the most suitable mortgage for you. As experts in the field of mortgages they are qualified in assessing your financial needs.
3. Does it pay to switch?
There are often clauses within your mortgage contract which stipulate a fee involved when ending you mortgage deal before the end. This is often referred to as the ‘early repayment charge’. It is important that you double check the current deals and configure what you might save by remortgaging. As aforementioned, ensure that all associated costs and fees are accounted for.
‘Loan–to–value’ is the limit of how much you can borrow in comparison with the current property value. The lower the ‘loan–to–value’ rate, the more deals that may be available to you and cheaper the mortgage deals.
How to calculate your loan–to–value?
- Divide your outstanding mortgage amount by your property’s current value.
- Multiply the result by 100.
Remember that when you apply for a mortgage, the lender’s valuation may just involve checking the outside of the property from the street. If you think their valuation is too low – and that you’re losing out on a better rate as a result – ask the lender to reconsider.
5. Remortgaging to get a better interest rate
When you take out a new mortgage, you normally get an introductory deal. Introductory deals normally last between two and five years. Once the deal ends you’ll probably be moved onto your lender’s standard variable rate, which will usually be higher than other rates that you might be able to get elsewhere.
Tip: When your introductory period ends, take a look at the market to see if switching to a new mortgage deal will save you money.
6. Remortgaging for more flexibility
Remortgaging may also enable you to:
· Get a more flexible deal – for example if you want to overpay
· Switch to an offset
· Switch to a current account mortgage – where you use your savings to reduce the amount of interest you pay permanently or temporarily
7. Remortgaging to consolidate debt
Often people choose to remortgage in order to pay off other debts. Whilst interest rates on mortgages are usually lower than personal loans, in the longer term you could end up paying more.
It is recommended that you try and prioritise – clear your loans separately!