So, what is a remortgage?
Remortgaging is the process of transferring your existing mortgage to a new lender without actually moving home. Your remortgage will clear your current mortgage.
And, why should I consider it?
Well, remortgaging allows you to take full advantage of the latest deals on offer, and you could potentially...
- … save money. Switching to a lower interest rate will instantly reduce your monthly payment.
- … raise money. Remortgaging allows for the equity in your property to be released. So if you are looking for a little extra cash for home improvements, a new car or that well deserved holiday a remortgage on a lower interest rate can be a cost effective solution.
- … consolidate existing debt. By remortgaging and taking advantage of lower interest rates, and borrowing a little extra, you can consolidate expensive debt such as credit cards, store cards etc.
- … avoid moving house. If a larger home seems out of reach, why not extend your current home? A remortgage could raise the money for an extension and increase the value of your home whilst saving the upheaval and extra cost associated with moving, such as stamp duty.
When should I remortgage?
If you are approaching the end of a fixed or discounted rate, or are on the lenders Standard Variable Rate then think about remortgaging now and save money sooner.
What is the process?
Firstly, establish the reason why you want to remortgage. Are you trying to save money on your repayments? Or are you looking to raise money? If you want to borrow more money you must ensure there is equity in your property.
Secondly, contact your existing lender to obtain a Redemption Statement. This will detail what you currently owe.
Thirdly, do your sums! Make sure you will be better off if you remortgage. There will be charges and fees, so it is vital the savings made will exceed the costs.
What are the charges and fees you mentioned?
Redemption penalties may be imposed by your existing lender for clearing you mortgage. These will usually be higher if you are still in a fixed or discounted period. Most lenders also impose a release of deeds fee and/ or a sealing charge. Your redemption statement will show any charges payable.
Valuation fees will be payable as the new lender will require an up-to-date valuation. These are generally not as expensive as a house purchase.
Conveyancing fees are also payable as local searches are required, previous searches are not valid as they only have an effective date of 3 months.
** Many lenders offer remortgage packages which entitle you to FREE or refunded valuation and legal fees providing you use their own panel of Surveyors and Solicitors.
Arrangement fees and/or application fees along with mortgage indemnity fees can also be incurred.
How long does a remortgage take?
Although the process is very similar to a house purchase it is much quicker.
The length of time it takes depends on the lender, but usually expect around four to six weeks.
If you are in a hurry, some lenders offer a ‘fast track’ service and some offer on-line services.
There are certain steps you can take to ensure your remortgage is quick and proceeds as smoothly as possible.
- Gather your salary details
- Bank statements
- Proof of identity
- Mortgage statements for existing lender
How much money could I save?
Putting the costs involved in remortgaging to one side for a moment, the potential savings in terms of monthly expenses can be quite considerable.
Here is an example:
If you are paying 7.5% on the lender’s Standard Variable Rate for a 25 year mortgage of £150,000 interest only, your monthly outgoings will be around £940 per month.
By remortgaging on a three-year fixed rate of 5.5% the monthly payments would fall to around £690 per month, offering savings of £250 per month. Even if the rate reverted back to 7.5% this still equates to a saving of £9,000 over the fixed rate period.
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