With mortgage interest rates at or near to record lows, now might be a good time to think about remortgaging, particularly if your current deal is finishing and you want to explore if you can lock into another product to take advantage of the good deals that are around at the moment, or if you perhaps have equity in your property that you’d like to release.
If you’re about to go from a fixed or discount deal to your current lender’s Standard Variable Rate (SVR), remortgaging may mean you can potentially save yourself money each month or reduce the length of time you’ll be paying back your mortgage, making you better off overall.
So, if you’re thinking about remortgaging, what are the main things you need to consider?
Fees and charges
Firstly, it’s important to take into account the various fees you may pay when remortgaging, not just the new monthly payment. Depending on the lender, you could find that any or all of the following might apply:
Early repayment charge from existing lender: Most lenders will charge you an ‘exit fee’ or early repayment charge (ERC) if you leave a deal early, and some products have what’s called ‘tie ins’ for a certain period even after a fixed rate or discount deal ends.
Arrangement fee to new lender: This varies depending on the deal and lender, and can be anything up to around £2,500. Some lenders will allow you to add your arrangement fee to your mortgage, but if you do that, then make sure you pay the fee off as soon as possible, so you’re not paying interest on it for the next 25 years!
Booking fee for new deal with new lender: This is often refundable provided you complete the mortgage, but if the mortgage isn’t approved then this might not be refundable
Valuation fee: Your new lender will need to ensure that the property you want to borrow money against is worth the amount they are going to lend you, so they will require a valuation on the property. The good news is, many lenders don’t charge for this, but if they do then expect to pay around £300or £400.
Conveyancing fee: There will be an amount of legal paperwork involved in a remortgage that you’ll need a solicitor to complete for you. Many lenders include this for free, however if you do need to pay, expect it to cost a couple of hundred pounds.
Mortgage broker or advisor fee: If you’re using a mortgage broker or advisor, they may charge a fee. Sometimes this is a flat fee, sometimes it’s a percentage of the total amount of the mortgage. Some advisors or brokers don’t charge, some do so make sure that you ask upfront what the costs are and get them in writing.
Loan to Value
You’re also likely to hear the term Loan To Value (LTV) crop up, which means the amount you’re borrowing, versus the value of the property, taking into account how much equity you have in the property to provide a ‘loan to value’ ratio. For example, if you had a property worth £200,000 and were looking to remortgage for £150,000 you would have £50,000 worth of equity in the property. This would mean you’re borrowing 75% of the property’s value, which means your LTV would be 75%.
So where can you go to find the right remortgage deal for you? Well, you could start online and check the various ‘best buy’ tables to familiarise yourself with what’s around on the market in terms of rates. But if you’re looking for expert advice on mortgages, it makes sense to speak to a broker, intermediary or advisor, as they can help you find the best deal to suit your individual circumstances. Also, make sure you check that they are regulated by the FCA, which you can do easily online by going to www.FCA.org.uk
Finally, it’s also worth bearing in mind that some lenders do offer exclusive deals to existing customers, so if you are thinking about remortgaging, it may be worth speaking to your current lender or the bank you hold your current account with first to see what they might offer.
Remortgaging may mean you can potentially save yourself money each month or reduce the length of time you’ll be paying back your mortgage, making you better off overall.