The Easy Guide To Remortgaging

By Author: Lucy Carter
Total Articles: 102
Comment this article

Remortgaging is simply the act of re-financing by exchanging your existing mortgage loan with a new one. You have the choice of either doing this with your existing loan supplier or by finding a different deal elsewhere.

Generally the reason for deciding to remortgage is to find a better, more cost effective loan than your current one. Financial experts agree that with the range of new deals constantly offered on the marketplace, it's wise to keep your eye out for new mortgage packages that could either better suit your needs or save you money.

A further reason that borrowers would benefit from re-financing their existing mortgage loan includes freeing cash when they retire if their pension fund is not large enough to cover the standard of living they're used to as well as their monthly loan payments - by extending the length of their mortgage term or reducing the term so that the mortgage is paid off sooner, their financial liquidity is improved.

The first step you will need to take when considering a remortgage is to ask for a 'Redemption Statement' from your existing loan provider, which will tell you ...
... exactly how much you owe them. You can then look at other mortgage deals and decide if a re-finance will benefit you. A mortgage repayments calculator will help you weigh your options.

The following guide provides the need-to-know facts you need to consider when deciding on whether a remortgage will benefit you more than your current deal.

Potential leverage with your current lender

While you might be tempted to remortgage with a new company, it's a good idea to first look at the deals available to you with your current lender. In particular, if you've had a good repayment history with them, they might offer you a better arrangement than the one you have to keep you from switching to a competitor.

Be clear on what's best

The wealth of different remortgage packages available on the marketplace includes flexible loans, trackers, cashback mortgages, capped rates and fixed-rate remortgages. For many, understanding and weighing the deal that will best benefit them is tricky. Make sure you not only thoroughly research what is available to you but have your potential lender explain exactly what's what for each type of loan. If you really want to be sure, you have the option of hiring an impartial and reputable mortgage broker who can help you make the right choice.

Understand the Standard Variable Rate

The Standard Variable Rate (SVR) is the interest rate that your lender will charge you when your mortgage deal expires. It is calculated at a higher rate by your provider than the fluctuating base rate which is set by the Bank of England. It's advisable to find a remortgage deal that does not include the SVR, since for example if you are paying an extra 2% charge higher than the base rate this can add up to a significant annual loss. Be aware that as soon as a good deal expires, you are automatically switched to the SVR, so that would be the time for you to seriously consider re-financing.

Beware of hidden fees and arrangement costs

It's important to know that while on the surface certain remortgage deals might seem unbelievably attractive, lenders can charge hefty arrangement fees to process the arrangement. Always check this cost with your lender. Also, while some lenders don't charge arrangement fees, they can apply pricey hidden fees such as valuation and legal charges. Make sure to read the fine print.

Check the early repayment charges

Some borrowers have a nasty shock when they look to remortgage because they discover that their current lender applies heavy early repayment charges to discourage them from changing loan providers. This is another fee that is crucial for you to know about. The best remortgage deals offer flexibility, so that you can take advantage of better offers when you choose.

The above top tips will help you decide on whether a remortgage is the way forward for you.
It's wise to consistently do your research and keep up to date with new offers arriving on the marketplace, so that you can be sure of having the deal that suits you best.
Sean Raston - economics student and expert in the remortgage process.