Remortgaging
Changing your mortgage can be a clever move. Here's how to do it to your advantage.
What is a remortgage?
A remortgage is the posh term for changing the mortgage on your existing property.
Many people wrongly think of a mortgage as some kind of financial prison sentence, but just because you've taken out a mortgage with one company, it doesn't mean you have to stick with them until the loan is paid off. It's a bit like credit cards, where you can transfer an existing balance between card companies. Lenders are as interested in attracting existing borrowers as they are first-time borrowers.
Why should I go for it?
There are many reasons why you might consider moving your mortgage without moving home. For instance you may want to take advantage of new mortgage options that weren't on offer when you bought your home - such as a better fixed rate. If you feel you're paying excessive rates of interest, compared to rival lenders then a remortgage may save on your monthly payments.
Perhaps you want to release part of the capital built up in your property, for example, to carry out home improvements. Or maybe you are just dissatisfied with your current lender.
You'll have to repay the sum you've borrowed, plus interest, one way or another. However there's nothing to stop you asking for a review based on good behaviour (i.e. you've proven you can keep up payments and want to renegotiate) or even a transfer to a more laid back kind of institution, one with better terms and conditions.
Whatever your needs, take time to go through a full range of mortgages available and speak to a Financial Advisor about the special advantages that each scheme offers.
Tell me the pitfalls
Much depends on interest rates. You always have to be sure that you can meet repayments whatever the economic climate. Borrowing may seem attractive right now, with interest rates running low, but what if they start to inch up? If you fail to make payments, you could lose your house, and be left wishing that you'd read the small print.
Check the details of your existing mortgage. Is there a redemption penalty? If there is, and it's large, it may wipe out the benefits of remortgaging. Mortgage brokers who offer to help you remortgage will often charge a fee on top of your new deal that gets added to your new mortgage, pushing the price up and making it less of a bargain.
I've done the sums. How do I go for it?
Begin by checking the terms of your current mortgage. Some deals lock you in for a certain period, so you need to find out if you're able to bail out without being hit with a penalty of any kind. Next, look for a lender that offers your kind of terms. If you're unsure where to start, seek advice from an independent mortgage broker.
Before you jump ship, however, it's worth chancing your arm with your current lender. If you've been a good customer, they may tailor a deal to keep you, which will save on the acres of paperwork that inevitably comes with a switch to a new lender.
Four steps to moving your mortgage:
- Contact a Financial Advisor to discuss the different mortgage options and decide on the option best for you. Fill out the new mortgage application form and sign it.
- The mortgage lender will arrange for a surveyor to visit your property. At around the same time you should instruct a solicitor to commence the legal work involved in your remortgage.
- The mortgage lender will issue a formal mortgage offer with the details of the mortgage. Soon afterwards the legal paperwork is completed by the solicitor.
- Your existing mortgage is paid off and your new mortgage starts.
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