Remortgaging – Martin’s Tips to Help Save Money Every Month
Remortgaging – Martin’s Tips to Help Save Money Every Month
One thing that we should all look to do now and again is too remortgage. Here’s some guidance from Martin on the process of remortgaging and how to go about it.
What is remortgaging?
Remortgaging is basically the process of changing your existing mortgage and switching to another mortgage product from either the same supplier or a different provider. Almost a third of all home loans made in the UK are actually remortgages.There are many advantages to remortgaging your property.
The reason to remortgage is usually to save money on monthly payments, but in some cases it may be to lock in on better terms than you have on your existing deal. Some of the main reasons why you might look to remortgage include:
If your current fixed-term rate is about to end, then it could be a good time to remortgage. At the end of a fixed rate term, a mortgage usually reverts to the Standard Variable Rate – which may be higher than what you’ve got used to paying. By remortgaging, at this time, you may be able to continue with another fixed rate deal in order that your monthly payments don’t increase.
You have come across a better rate on the market you’d like to access. Mortgage providers are changing the products that they offer regularly and it may be that there are more competitive deals available that weren’t available (or accessible to you) when you first started your existing mortgage.
You want to overpay your mortgage and your current provider won’t let you do this without charging you fees. Some people find that they are in a position to pay down some of their mortgage – either on a monthly basis or in a lump sum. Doing this reduces the amount you have to pay back to the lender over the mortgage term, so ultimately saves you money. But not all lenders or mortgage products allow you to do this.
You may want to release equity from your home, allowing you to access some extra cash while still continuing to live there. Home owners that may want to build an extension or make other costly improvements to their home, often fund such plans by remortgaging to a higher amount – and therefore releasing some of the capital value in the home.
You want to consolidate debt such as other unsecured loans or credit cards. Usually these arrangements come with significantly higher interest rates than mortgage rates, so by remortgaging – and increasing the amount of the mortgage – you can use this to pay off the other forms of debt and save money on interest.
Tips for Remortgaging
1.Get expert advice
You must get advice from a qualified financial adviser or mortgage broker. Not only will this safeguard you since, as regulated individuals, they will have to explain everything to you and evidence the fact that they have ‘matched’ you to the right product, but they may also have access to mortgage products that you wouldn’t otherwise know about. Their job is to search the whole of the market for the best product to suit your needs and you should be offered a range of best options for you. Because Financial Advisers and Mortgage Brokers operate as under the Financial Conduct Authority, you also have protection and if they advice they give you turns out to be not suitable or something goes wrong, you can complain to the FOS (Financial Ombudsman Service).
2. First check your credit score
Going through the process of remortgaging isn’t vastly different to applying for a mortgage first time round. You’ll go through a similar application process including having credit checks made on you by the lender. This is so that they can get a picture of how you are as a borrower. Missed or late payments on your existing mortgage or other credit agreements will show up on your credit report and could affect your ‘Credit Score’ – a number used to indicate your creditworthiness that lenders use to access how risky it is to lend to you. Make sure you check your credit score before applying for a remortgage. You can do for through sites like Equifax and Experian.
Always protect your credit score by ensuring that you pay off at least the minimum amount each month on credit cards and that all other payments are made regularly and on time.
3. Read the Small Print
Switching to a new mortgage before the official end of your deal usually involves a fee. This fee is called an Early Repayment Charge and can vary between different mortgage lenders and products. Additionally, there might be the usual legal, valuation, and administration costs involved that you should consider. You need to weigh up the costs associated with remortgaging against the savings you will make each month on interest payments.
4. Research Early
If you are coming the end of a fixed rate period and know that you will want to look for another deal, start the process of shopping around early. Don’t leave it until the last minute as you may be surprised at how long the process takes. By being ahead of time, you can familiarise yourself with the various options available to you and make a considered decision. Remortgaging isn’t something to rush!
5. Get your timing right
Most mortgage lenders allow you to secure a rate up to three months in advance. But you won’t have to start actually paying the mortgage right away. For instance, if your current mortgage deal ends in August, but you find a great deal in May, you don’t have to pay fee to leave our deal early. You can lock in the better rate instead and continue paying off your current mortgage until your switching date.
6. Check with your current provider if they can match your new deal
After you know the sort of deals out there and what to expect, it’s always worth reaching out to your current mortgage provider. They may be able to match the best remortgage deal you can find. You may have to be pro-active – lenders may no come to you offering better deals for you, so be prepared to call them and explain that you are considering switching and see what they come back with. Sticking with the same lender, even if you move to a new product could save you time and money as they will already have you as a customer and you won’t have to actually go through the full remortgaging process that you would if you were to switch providers.
“Remortgaging is something which many homeowners avoid simply out of ignorance, laziness or fear. But, the remortgage process can be extremely important as it’s one of the best ways for borrowers to be able to save money. A mortgage tends to be the biggest financial transaction in a person’s life, so it’s important to know your options and be aware of any possible savings.”