When you have an existing mortgage and then opt for a new mortgage using the same property as collateral then this is termed as a remortgage. This is normally done to save money by choosing a new lender who offers lower interest rates. Another major reason for this is to raise capital or consolidate smaller short term debts.
Basic reasons for remortgaging:
There can be several reasons but two of the most common reasons are as follows:
To save money: Quite a big number of UK nationals choose to remortgage in order to reduce their monthly repayments or take advantage of the low interest rates offered by the new lender.
To raise capital: Remortgaging is the best way to release the equity in your home. This is most beneficial when you want to club small debts together so as to handle one big debt with ease. It also works well when you want to go for home improvements and add some more value to your property. This is beneficial as it allows you to switch lender without paying any penalty.
People in the UK are often in the lookout for better mortgage deals than their current deals. It does happen in most cases that after the initial fixed rate, you are bound to pay the higher rate which can be really expensive. At these times, you can choose another lender who offers a better deal and lower interest rate on the same property, which is the basic function of remortgaging.
Eligibility for remortgaging:
Anyone with an existing mortgage can choose to remortgage if they match the criteria set by their new lender. The best time for the switch should be when your fixed rate payment period comes to an end or if any discounted deal you’re on comes to an end. This is significant as staying with existing lender will existing lender will lead to you paying the variable interest rate which may not be the best deal available in the market.
Best time to remortgage:
When your existing deal comes to an end, you should keep an eye out for the best deals. Hower , if swiching provider has exit fees or penalties then leaving thae deal early might not be most economical solution . you should do a risk benefit analysis for both cases , should you stick to the current lender or make a switch to another. check which one is most beneficial for you.
Time taken by the remorgaging process:
It normally takes a month to finish all the paperwork and get the value of your property. On completion of the process, the lender will notify you with a completion statement.
Is there any fee for remortgaging?
This is an important aspect which needs to be checked while you are planning to remortgage. If you current mortgage has exit fees then it could be has high as a few month of interest which will rub out some, if not all , of tha saving mode from changing tha mortgage provider.
In other cases , mortgage companies charge a standerd fees to terminate a mortgage. However, the best part is that these charges have been reduced by most of the lenders.
To proceed with remortgaging, you need to pay certain charges like legal fees and valuation. Some of the companies would refund this money or waive it off as part of their customer care service if you switch to them.
Mortgage arrangement fees can actually cost you £1,000 or more. So, do watch out for these kinds of fees and expenses. You may also need to pay advisers and mortgage brokers to get an excellent remortgage deal.
Method to find the best remortgage deal:
You should be aware about the following so as to get the best mortgage rates:
Approximate value of your home
The percentage of the value which you would like to borrow
Your annual income
If you are naming others on the mortgage then their annual income information
You would also need a redemption statement from the current lender so as to know how much you owe. It is important to know why you are remortgaging – to save money or to release equity. Also, decide upon which type of mortgage you plan to switch to – fixed rate, tracker or Offset mortgage. This will help you in better planning.
Taking the help of a mortgage calculator:
It is always good to use a mortgage calculator to compare all the deals. It will show you the cost of the current rate and the exact amount you can save on switching.
You can get a lot of information through a mortgage calculator and compare available deals to know the monthly repayments.
For more information about remortgaging, read our guides and check our website freepricecompare.com or you can talk to our finance experts by calling us on 08008807656.