With remortgaging rates continuing to climb, we thought it was time to set the record straight on these common myths.
Despite rates rocketing by an average of 15% every year, many of us are still in the dark when it comes to the benefits of remortgaging. With so many misconceptions and rumours, it can be difficult to make a decision on what’s best for you and your finances.
That’s why we’re here to put an end to these remortgaging myths…
1) Remortgaging is a last resort
It’s a common misconception that people only remortgage their home as a last-ditch attempt to raise funds. While people often remortgage their home for a bit of extra money, it’s not necessarily the only reason for doing so. You might consider remortgaging for these reasons, too:
Better interest rates
Let’s say you’ve got a fixed-rate mortgage. After the fixed term expires, it’s fairly likely that you’ll be put on a higher variable interest rate, meaning you’ll have to pay more each month.
If your phone company suddenly hiked up the costs, you’d probably start shopping around for a new provider. Well, why should mortgages be any different?
For an easier experience, it’s a good idea to start shopping around a few months before your fixed term comes to an end. This way, you’ll have enough time to fill out all of the paperwork before your interest rates start to rise.
If you’ve had your mortgage for a long time, you’ll know that life can change. Maybe you’ve inherited a sum of money and you’d like to increase the amount you’re paying off your mortgage – or perhaps you’ve been struggling and need a payment holiday.
Whatever the reason, it’s likely that there’s a mortgage out there which could meet your needs. You could look into dealing with a broker, as they could help you find a deal which suits your circumstances.
2) It's really complicated
If you’re wondering whether remortgaging your home is more effort than it’s worth, you could well be wrong. Remortgaging is actually a fairly simple process, providing you give yourself enough time to shop around.
Let’s break it down into three simple steps:
1- Gather documents which prove your identity and income
This will be the same kind of information you used when applying for your original mortgage, such as payslips, utility bills and around three months’ worth of bank statements.
2- Ask your current provider before comparing other deals
It could be a quicker and easier way of remortgaging if you can get a deal from your existing provider, also known as a Product Transfer. Even if they can’t offer you a good deal, they’ll give you a quote called a Key Fact Illustration which you can use to compare with other lenders.
3- Apply for your new mortgage
After comparing deals, you might decide to go for it and apply for a better deal. The lender will then make a decision based on your affordability and credit history. If you’re accepted, you may have to cough up some fees at this point, as it’s likely that you’ll have to work with a solicitor to handle the legal side of the transaction.
To make the whole process simpler, you could look into working with a broker, as they’ll speak to lenders and search for deals on your behalf.
3) You can’t remortgage with bad credit
You might be wondering what the odds are on remortgaging your home if you have a less than perfect credit score. While the top-of-the-range deals might be off limits, having a poor credit history certainly won’t stop you from remortgaging your home.
There are many providers who actually specialise in lending to people with bad credit. Hiring a broker will help you find those lenders who are more likely to accept your application, meaning you’re less likely to be turned down – as this could affect your credit score.
Taking a good look at your credit report before you apply for a remortgage can only be a good thing. By fixing any mistakes and looking at ways you could improve your score, you’re giving yourself the best possible head start.
Speaking of mortgages, we ask… is it possible to take out a mortgage with debt?
Disclaimer: All information and links are correct at the time of publishing.