Remortgaging: The Basics

There are many reasons why people look into the option of moving their mortgages to a new provider, or to renegotiate with their current lenders. Chief among these are:

• To reduce monthly repayments
• To release equity from a property
• To finance improvements
• To finance the purchase of another property

Even if you do not fall in any of these categories, it would still be a very good idea to regularly investigate whether you cannot perhaps ‘do better’ than your current mortgage arrangement, especially if you are currently on a simple ‘Standard Variable Rate’ mortgage.

Many people are reluctant to even consider the option of remortgaging since they imagine it to be a very drawn out, complex and expensive process. The fact is however that it need not take more than a few weeks. As far as cost is concerned, lenders will often waive some of the arrangement costs or valuation fees. It could still be worth your while to continue even if they don’t, as the savings that you make could quite possibly outweigh any fees or charges that you will have to pay.

If you decide that you would like to remortgage, you will have to take a few basic steps. They are:

Analyse your current mortgage: How much do you currently pay? Will you have to pay any early repayment charges if you move your mortgage? (In some cases these can be so hefty that it would be better to wait for the penalty period to expire before you attempt to remortgage)

Compile a wish-list: What are you looking for in a mortgage? Write down the specific features that you are looking for (e.g. Ideal rate, the ability to ‘offset’ your savings against the mortgage etc.). This exercise will leave you with a much clearer ‘road map’ when you start looking for deals.

Investigate as many options as possible: Compare different deals by phoning around and doing some research on the internet.

Speak to your current lender first: Once you have a good idea of ‘what’s out there’ it would be a good idea to speak to your current lender and to let them know about the deals that you can get in the market. It could be that they would be willing to match that in order to keep you as a client.

Consider all relevant fees, charges and costs before applying: It might be that some products offer a very attractive interest rate but that they will ‘sting’ you with very high costs and fees. Things to look out for (and put a value to) are:

• Mortgage Indemnity Guarantee Premiums: These are payments that protect the lender, but not you, in case of default.
• Compulsory Insurance
• Loan arrangement fees
• Booking Fees
• Valuation Fees

It is possible in some cases to get a fee-free mortgage at a higher interest rate. This could be worth your while if you are borrowing a smaller amount (e.g. under £100 000). In other cases you should tally up all the relevant costs, take into account the interest rates offered, and choose the best overall deal.

Apply: Once you have decided on your preferred lender the next step would be to apply for a new mortgage from them. Most lenders will be very helpful in guiding you through the process and your new mortgage should be in place in a matter of weeks if approved.

Summary:

• People remortgage for a variety of different reasons
• The first step to remortgaging is to analyse your current position
• This should be followed by the drawing up of a ‘wish list’ of what you are looking for in a mortgage
• The last steps are to analyse what is available in the market and then to apply to your preferred lender.

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