Remortgaging could save you money if you are due to switch onto the Standard Variable Rate with your existing mortgage lender.
Remortgaging could take as long as three months, depending on your circumstances, so it’s a good idea to start thinking about getting a new deal early.
Once you apply for a mortgage, the rate you’ve applied for will generally be secured for at least 3 months.
Here are 4 questions you should be asking yourself before remortgaging.
Are there any Early Repayment Charges?
Generally, fixed rate mortgages penalize you for ending the mortgage within the deal’s initial period. This is known as an Early Repayment Charge (ERC). Remortgaging at the start of a 5 year fixed rate mortgage could typically mean paying an ERC of 5%. On a £100,000, that’s £5000!
Any early repayment charges should have been stated in your Mortgage Illustration or Mortgage Offer letter, so before remortgaging, you should dig this out.
If there are ERC’s on your mortgage, you may want to consider waiting until they no longer apply. It’s worth noting that ERC’s are typically only payable if you complete on your new mortgage within the chargeable period. It’s common practice to start arranging your new mortgage early, so it’s ready to go when the ERC lifts.
Have I Checked my Credit Report?
Often, remortgaging with your existing lender will not lead to a check on your credit history – provided you’ve kept up repayments and are not changing the term or borrowing under your mortgage.
If you are considering a different lender, your credit report will be reviewed. Your credit file is a summary of all of your current and previous loans and credit cards. It also lists your address history and any evidence of defaults, CCJS, IVAs or missed payments.
Your credit file will be one of the key things the lender will use to decide whether or not to give you a mortgage. If you get turned down based on poor credit, this could further impact your credit score – it’s a slippery slope!
We suggest checking your credit score using a website such as checkmyfile.com
How much is my house worth?
The bigger the difference in your loan and the value of your home (equity), the better mortgage rate you’re likely to get.
When applying for a mortgage, it’s important to have a clear, realistic idea of your home value, or you could end up applying for a product which is unachievable.
A mortgage lender will normally value your home before offering you a mortgage. This makes sure that they can sell it on should you default. You should get ahead of the game.
Have a local estate agent value your property, or do your own local research and use online tools such as rightmove or mouseprice to validate your findings.
How am I going to apply to remortgage?
You can find remortgage deals by:
- asking your existing lender
- using a comparison website and doing it yourself
- speaking to a mortgage broker (like us!)
Your current Lender
This can be the easiest option, but you’ll only have the ability to access a small selection of remortgage deals, meaning you might lose out on potential savings.
Comparison Websites
They’ll search across a wide variety of lenders to find the lowest rates – but won’t tell you if you’re actually eligible for a particular mortgage.
Mortgage term, rate type and hidden costs are all things you should be thinking about. You won’t normally get any advice and will have to apply by yourself. A failed mortgage application can damage your credit score.
A Broker
Even if your circumstances are challenging, a broker can give you advice, compare mortgage products and help you secure the deal.
At Exley Financial Planning, we do all the hard work, so you don’t lose sleep worrying whether you’ve done the right thing.
We’ll also let you know if there are any other ways you could be making more of your money.
Solicitors
If you’re remortgaging with your current lender, you wont need a solicitor. If you’re changing to a different lender, then you will! Typically lenders offer Cash back incentives or ‘free legals’ to help you switch, so bear this in mind when you’re searching.
