As a homeowner, the remortgage process can feel a bit daunting. However, it could save you a lot of money.
The remortgage process is in essence another version of obtaining a mortgage, in the same way you did when you first bought your home, however there are some differences you’ll come across. So we’ve put together this guide on how to remortgage, how much it’s likely to cost and where to look for the best deals.
What is remortgaging?
As a first-time homeowner, you may not be familiar with the remortgage process. To put it simply, remortgaging is changing your initial mortgage that you used to purchase your home, and either moving to a new product, or even a new provider.
There are a number of reasons why you may choose to remortgage. Switching to a new mortgage can be a good way of reducing your monthly payments, as it allows you to shop around and find a better deal. Some people remortgage to release some of the equity n their home. This is often used for home improvements.
Remortgaging is when you change your mortgage on your current home. When moving home and transferring your current mortgage to the new property, this is known as ‘porting’ your mortgage.
When should you remortgage?
The remortgage process usually starts when you are coming to the end of your current fixed deal. When these fixed rates expire, your mortgage is transferred onto the lender’s Standard Variable Rate (SVR) which could see you paying more than you need to on your monthly payments.
Choosing to remortgage onto a lower fixed rate could allow you to save money each month. Again this new deal will be for a limited period of time (typically two, three of five years) after which you’d need to start the remortgage process once again.
How do I remortgage?
Even as a homeowner, the first time you remortgage can feel daunting. Here are a few steps to follow:
If you aren’t sure how to go about remortgaging then don’t go it alone. Seek some help from a mortgage broker, who’ll be able to take you through the remortgage process. This will take away some of the legwork and they could be able to find you a great deal.
Check your credit score
When you remortgage, you are essentially going through the same application process as you did when you took on your first mortgage. So this means passing all the credit checks that are expected. If your circumstances have changed since your last application, this could affect your credit score. It’s worth checking so you aren’t setting yourself up for disappointment. You can check your credit score for free on sites such as Experian or Clearscore.
Be aware of hidden costs
Remortgaging does bring with it some additional costs. Look out for application fees as well as legal and valuation fees, especially if you are switching to a brand new provider. However, there could also be costs that you’ve not considered.
If you are remortgaging before your current deal has ended, you may have to pay a penalty fee, known as an early repayment charge. This charge is usually a percentage of your outstanding loan and the amount you pay will usually reduce the longer you wait. However it can still add up to a significant amount. If you still plan to move before your deal ends, ensure that any savings you make on the new mortgage are not completely wiped out by the penalty fees.
Finding the best remortgage deals
So once you’ve decided to start the remortgage process, how do you go about the best deals?
Start your search early
Don’t leave it until the last minute to have your next mortgage in place. Start your search a few months before your current deal ends. Once you have found a suitable mortgage deal, the agreement will usually last for around three months so you’ll be ready to switch the existing deal ends.
Speak to your current provider
Take a look at the best deals you can find online, and use these to work out final costs etc including fees. At this point, it may be worth a chat with your existing lender. They may be able to match a deal from another provider. Staying with the same lender can streamline the remortgage process, as there is much less admin to deal with.
Use a mortgage broker
Employing the services of a mortgage broker can take the stress out of the remortgage process. A whole-of-market broker will have access to many deals that aren’t available on the high street, so could potentially find you an even better deal. A broker will also be able to use their knowledge to let you know which deals you are likely to be accepted for, which can save the heartache of rejected applications.
Applying for your new mortgage
If you’ve followed the tips above, you should be ready to take the plunge and apply for your new mortgage. It can be a nerve-wracking process, but by taking all the necessary steps as outlined here, you should be in a good position to get a great remortgage deal.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE