Re-Mortgages
Remortgaging makes up a large chunk of the UK mortgage market, and it's no wonder as there are hot deals coming out every week.
We have the most competitive mortgage market in Europe which is great for someone remortgageing because you can take advantage of this and switch to a lender with a lower interest rate.
It is quite common for borrowers to change their lenders every 2-3 years and in fact the cost of not doing so can be very high. Remortgaging can save you on average £100 a month compared to your existing mortgage payments.
And nowadays remortgaging is even easier than before as lenders are falling over them selves to compete for your business.
When remortgaging you have two categories of products open to you - fees free remortgage and normal remortgage.
Fees free remortgage...
A fees free remortgage means that you pay nothing in switching lenders, you don't pay survey fees or solicitor fees or lender's fees and as a result you remortgage for "free" representing a big saving.
However beware of such deals because they normally carry a higher rate of interest than if you were paying the fees and costs in the normal way. Remember lenders have to make their money some how.
As an example, a lender may offer a remortgage deal with all fees paid at an interest rate of 5% fixed for 2 years, the same lender has another deal at 4.85% fixed for 2 years but you pay for all the fees.
This means that the lender is charging you a higher rate of interest on it's fees free remortgage raising the point that it's not really free after all.
Normal remortgage...
The alternative is to get a normal remortgage and pay for the fees and costs yourself.
Thankfully the fees and costs associated with remortgaging are a lost less than when buying a property.
For a start the solicitors fees is a lot less, you'll pay a valuation fee as normal and may have a product booking fee (sometimes charged by the lender for taking out a specific mortgage), but you won't have to pay stamp duty again.
As a result, the costs associated with remortgaging are around a third of those associated with purchase.
When to remortgage...
One thing to be aware of when remortgaging is getting the timing right. You need to start the ball rolling around 2 months before your current mortgage deal comes to an end.
If you remortgage before this time then you may have to pay a penalty to your existing lender know as an early redemption charge.
If you remortgage after your deal comes to an end you could risk being put on your lenders standard variable rate (refer to guide to interest rates for an explanation) and paying higher monthly mortgage payments as a result.
So make sure that you start the process of remortgaging around 2 months before your current deal comes to an end.
Raising money...
You may be looking to raise money on your remortgage whether to buy another house or for home improvements or to pay off some loans or for other reasons.
In this case the amount you'll be able to raise will depend on your income, and level of equity you have available on your house.
Generally you are able to remortgage up to 95% of your property value. So if you have a property worth £200,000 with a current mortgage of £150,000, then you can remortgage up to 95% which is £190,000 raising £40,000 as a result.
This would require you to have an income of around £38,000 (using 5 times income calculation). Obviously be aware that borrowing more money will mean having higher mortgage payments.
If you have missed mortgage payments...
If you have been behind at some point with your mortgage payments then this will put you in the category of having bad credit meaning you'd need a bad credit remortgage.
If you're currently with a clean credit lender such as one of the high street banks then the interest rate on your new mortgage will probably be higher than the interest rate you're currently paying, negating the benefits of remortgaging. Read the section on bad credit mortgages.
In such situations it is better to speak to a mortgage adviser as different lenders handle mortgage arrears differently.
As a final word, speak with your existing lender to see if they can offer you a better rate and use this as a benchmark to compare against other mortgages when you're shopping around.
To search for a remortgage deal click here.
If you'd prefer some personal advice click here.