Remortgages

Typically most mortgages have a deal period associated with it. About two to three months before this deal period comes to an end, it’s advisable to start shopping around to find the best remortgage deals available. If you just stay with your current lender after the end of the deal period – say two or three years – will mean your mortgage reverts to the lender’s Standard Variable Rate (SVR). You can stay on your current lenders SVR or possibly remortgage to a new product with your existing lender, you can also remortgage to a completely different deal with a new lender.

When remortgaging, it is advisable to find a mortgage broker that provides services from the ‘whole of market’. With the current state of the remortgage market, people need a broker.

If you switch your mortgage to another mortgage product or lender this is called remortgaging. This process has the potential to bring financial benefits, however if you make the wrong choice it could have opposite effect.

The main reasons for remortgaging

The most usual reason for remortgaging is to find a better rate (especially if you are about to revert to a less competitive SVR). Also people sometimes consolidate debt or release equity when remortgaging.

You may also have to remortgage if you are moving house, even if your lender will allow you to transfer your current mortgage to the new property.

Remortgaging doesn’t only happen when your mortgage deal is finishing. For example, if someone has a fixed rate mortgage, and interest rates plummet, leaving them stranded on a much higher rate, remortgaging to a more competitive rate may make financial sense. However remortgaging is unlikely to be without costs. The current mortgage may carry penalties or charges if you remortgage early and there may be costs associated with the new remortgage, therefore all these considerations need to be factored in before a decision is made.

Typical Remortgaging problems

As a result of the credit squeeze over recent times, most lenders withdrew their larger loan-to-value (LTV - the amount lent as a percentage of the property's value) remortgage. Although this isn’t good news for first-time buyers, it’s also impacting on borrowers looking to remortgage. Combine this with the recent reduction in house prices and a lot of people who borrowed more than 75% some years ago are finding themselves facing the prospect of having very few remortgage options available. If you find yourself in this situation you may need to build up more equity in your property before you can remortgage, as there are only a few lenders who will offer a LTV of up to 90% currently.

Lenders are being more choosing of who they remortgage to and how much they lend, as a result of current financial situation. So if you had a good mortgage deal a few of years ago, this don't necessarily mean you will be in a position to do so when you remortgage.

How to remortgage?

Remortgaging should be straightforward if you are staying with your existing lender. Your lender should contact you before your mortgage deal comes to an end, to talk through your options. Alternatively, you can call them. But don't feel that you have to stay with them; there is a whole range of lenders available in the remortgage market that could have a more suitable remortgage for your needs.

However, if you want to be sure you find the best remortgage product for your needs, then you may want to get the help of a mortgage broker. Not only are they more capable of finding the right remortgage for you, they also have access to products that aren't available in the general marketplace. All mortgage brokers are regulated by the Financial Services Authority, so must advise you in accordance with treating their customers fairly. They have to find the remortgage deal that is right for each borrower and can’t just recommend a remortgage product that may be lucrative for them.

How long will the whole remortgage process take?

Most people who have remortgaged in the last year have sorted the whole thing out in about four to six weeks and some far less than that. If there are complications, it may take some time to remortgage. Your adviser can give you an idea of the typical timescales involved.

Are there redemption fees/penalties associated with remortgaging? What are they?

It is important to find out if you have any redemption fees/penalties associated to your existing mortgage, before considering remortgaging. Special offers that you may have with your existing mortgage usually last for a set period of time. Redemption penalties are costs that you will have to pay to end your mortgage early. Redemption fees are there to ensure you are tied in to the mortgage long enough for them to make a profit. Penalties can be very high within the first year. This ensures the costs lenders incur setting up a mortgage are covered, regardless of whether or not you keep the mortgage. The duration of the penalty period will vary from mortgage to mortgage, although some mortgages have no redemption charges whatsoever.

If I have redemption penalties/fees, should I remortgage?

The thing to do is to add up the total redemption penalty fees to see if they offset any potential savings. If they don’t it could still be worth remortgaging, however if they do remortgaging is likely to be futile.

Will there be any valuation fees associated with remortgaging? What are they?

When remortgaging, the new lender may charge you a valuation fee. This is because lenders will not rely on the original survey when assessing the remortgage value of your home. However, most lenders don’t charge a valuation fee when remortgaging.

Are there administration and legal fees associated with remortgaging? What are they?

When remortgaging sometimes administration and legal fees will apply, this could cost you roughly between £300 and £500. Again you need to total up all fees to ensure they don’t offset any potential savings. However, lenders usually don’t charge these fees if you agree to use their recommended conveyance solicitor when remortgaging.

Are there any situations when remortgaging is not right for me?

Yes, if you have a small mortgage of £25,000 or less. You may be under the mortgage lender's minimum remortgage amount.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED AGAINST IT. Securing short term debts against your home could increase the term over which they are paid and therefore increase the overall amount payable.