Essential Facts About Remortgaging

By Author: Lucy Carter
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In a nutshell, remortgaging is the replacement of an existing mortgage with a new one (this can be done using your existing lender or a different provider). In effect what you are doing is re-financing your current mortgage.

There is a growing trend for savvy borrowers to switch lenders to take advantage of better deals. In fact the experts advise customers to regularly and carefully review their mortgage arrangement, not only to see if they can save money, but to ensure the terms they have agreed on continue to suit their personal circumstances. Homeowners can potentially save hundreds or even thousands of pounds a year if they remortgage their property with a new lender or get a better deal from their current provider.

Apart from the savings to be made, there are other reasons why you may wish to switch. For example, some people may have a mortgage term that runs on longer than the day that they plan to retire. The problem with this is that not many people will have built up a pension fund large enough to provide enough income to pay for their normal standard of living plus keep paying off a mortgage. It may ...
... be that they need to remortgage to reduce, or even increase the length of their mortgage term.

To kick start the process of taking out a remortgage, you will need to get a 'Redemption Statement' from your current lender which tells you how much you still owe them. Depending on the specifics, remortgages usually take approximately one month to be finalised.

Like any financial transaction however, a remortgage carries both pros and cons. The following top tips on remortgaging will help you make the best of this course of action.

The right advice

There is a vast range of different remortgage products available in the marketplace. These include trackers, fixed-rate remortgages, capped rates, cashback mortgages and flexible loans, among many more. If you are inexperienced in this area, it can be daunting deciding what suits you best as well as navigating the pros and cons for each. Make sure the lender you choose for your remortgage fully explains the advantages and disadvantages of each loan product. If you're finding it hard to get your head around it all, you can always consider taking impartial financial advice to give you peace of mind in making the right decision.

Flexibility is key

Try to keep your remortgage arrangement as flexible as possible. Many mortgage lenders apply hefty early repayment charges to their loans to encourage borrowers not to remortgage. Often, these charges can equate to several months of mortgage payments. For this reason it's important to check the early repayment charges before choosing a remortgage.

Importance of Standard Variable Rate

Always be aware of your lenders standard variable rate before taking out a remortgage. Whether you are getting a fixed, tracker, capped or other remortgage product, be aware that when it expires you will have to pay the standard variable rate offered by the lender. Make sure their rate is competitive by comparing your lender's charge with the standard variable rate offered by other lenders.

Arrangement fees and hidden costs

It's important to compare the arrangement fees of different lenders before making your remortgage choice. Some loans include extremely high arrangement fees. Be aware though that while certain lenders don't charge a fee for setting up a remortgage, they often apply these costs in other ways such as charging for legal fees and valuation.

Re-assess to stay ahead of the game

It's a good idea to evaluate how competitive your mortgage loan is every year and calculate whether a remortgage would save you money - by refinancing you could find a better deal with lower interest repayments over the life of a loan. While you can remortgage as often as you want, keep in mind though the potential costs of early repayment charges and arrangement fees.

The above information gives you the key facts about remortgaging. Since there are so many mortgage products in the marketplace, it's a good idea to consistently keep up to date with what is currently available to you.
Sean Raston - economics student and expert in remortgaging.