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Remortgaging – A Guide to What you Need to Know
The process of remortgaging is essentially a refresh of your current mortgage and it can be done for a number of different reasons. The process doesn’t necessarily mean you switch mortgage providers, it just means taking on a new mortgage after a review of your existing one.
When is the Right Time to Remortgage?
The best time to remortgage is generally when your current mortgage deal is coming to an end. If you have a fixed rate mortgage deal, you ideally need to look at remortgaging five to six months before the end of your term.
The more time you leave yourself to remortgage, the easier the experience is likely to be as leaving it until the last minute can make it an unnecessarily stressful process and also adds the risk of having to be put onto your lender’s standard variable rate, which is often higher than the one you have been paying.
Mortgage rates can change, but the mortgage offer you secure at the time you decide to remortgage will stay ‘locked’ in place for up to six months (this time period can vary depending on different lenders).
We will also actively manage and review the rate you have secured, so if the lender you have secured a remortgage offer with decreases their rates, most will allow you to change the product on your initial offer and will reissue you with a lower remortgage rate.
Reasons to Remortgage?
There are many different reasons why people consider remortgaging to release capital, the most common ones are:
- To fund home improvements
- To purchase another property
- To pay off debts
The reason you remortgage is very dependent on your personal situation, so it’s important you take professional advice when you are thinking about remortgaging – particularly if you are doing so to consolidate debts.
Reasons You Shouldn’t Remortgage
If you’re in a fixed rate period on your current mortgage, it’s likely you will have early repayment charges. If you have an early repayment charge that is due within your fixed rate, it’s important you weigh up whether remortgaging in this period is going to be cost efficient – as repayment charges can be quite high.
If you’ve had credit issues in your recent history, it may not be cost effective to replace your current mortgage with another lender.
What happens when your current mortgage expires?
With the likes of tracker and fixed rate mortgages, you will automatically be put on your lenders standard variable rate (SVR) when your current mortgage expires. This SVR is generally higher than the rate you would have been used to paying.
This can cause some ‘payment shock’, as this then increases your monthly payments to an amount you aren’t comfortable paying.
Your mortgage rate can reduce when you’re put on the SVR if your current mortgage rate is higher than your lender’s SVR at that time, but this isn’t very common.
How do you prepare for a Remortgage?
It’s important to dig out all your current mortgage documents, particularly your annual mortgage statements from your current lender (your most recent statement will give you an idea of your current mortgage balance).
Similarly to when you purchased the property initially, a lender will require to see certain documentation from you regarding your income and expenditure – such as bank statements and tax documents. It’s therefore a good idea to have these up to date and ready to hand over when the time comes.
It’s also a good idea to think about your objectives and priorities when it comes to your remortgage. You can then approach a mortgage adviser and work together to ensure you secure the most suitable remortgage for your needs.
Why Should You Come to a Mortgage Adviser if You’re Looking to Remortgage?
The remortgaging process can seem very daunting and intimidating, it’s therefore a good idea to have a broker on board who can act as an adviser, bring the best remortgage options to you and help you make sense of the process as they guide you through it.
Engaging with a mortgage adviser early enough means your situation can be reviewed in plenty of time, making the entire process a lot less stressful.
What Fees are Associated with remortgaging?
Most ‘general’ mortgages come with solicitors and estate agents fees, but remortgaging can be quite cost effective.
As you are in an existing property and you are remortgaging an existing remortgage, lenders will want you to move over to them so they often assist with the legal fees you may incur. There are some cases where this doesn’t happen, but in the majority of cases lenders do offer financial support.
You can incur arrangement fees if you remortgage and these are usually around £999. If you are moving to a lower mortgage rate it may be worthwhile paying the fee, but this is something you would discuss with your mortgage broker as it’s very dependent on your personal situation.
Get in Touch
If you want to get in touch with us so we can support you with the remortgage process, you can contact us via our website using the contact form and a friendly mortgage adviser will be in touch.
You may have to pay an early repayment charge to your existing lender if you remortgage early.
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