Own a home and unhappy with your current mortgage deal? You may well be thinking of remortgaging.
In this blog, we take a look at how remortgaging works, why you might want to switch deals and how to go about this.
There are a few different reasons why you might consider remortgaging. Here’re a few examples:
- Your current fixed or tracker-rate mortgage offer has come to an end and you want to sign up to a new deal, rather than switch to the Standard Variable Rate.
- Your current rate isn’t competitive enough.
- The value of your property has significantly increased so you think you could be getting a better deal than you’re on currently.
- You’re worried that interest rates will go up and are keen to switch deals before they do.
- You’re considering borrowing and want to secure this money to your home and pay it back along with your mortgage.
- You want to overpay and your current deal won’t allow you to do so.
Whatever your reason to remortgage, you need to carefully weigh up whether it’s the right decision for you. For example:
- Will you have to pay an early repayment charge if you remortgage? This can be pretty pricey and may even cost you more than you’ll save switching to a new deal.
- Does the new mortgage deal come with fees to pay? Will these cost you more than you’ll save by switching?
- Borrowing more or extending your current mortgage term means you’ll most likely pay back more interest than you originally planned. Are you happy with this?
- Are you in negative equity? If you are, remortgaging is unlikely to be an option.
- Have you had financial difficulties since you took out your current mortgage that have affected your credit history? This is one of the factors lenders take into account when deciding whether to lend to you.
- Have your circumstances changed? Perhaps you’ve reduced your hours at work, or had a child and so have more committed expenses. Lenders look at your income and outgoings to work out what you can afford to repay each month, and this will affect the deal you’re offered.
Only you can decide whether remortgaging is the right decision for you. If you think it is, let’s take a look at how to go about it.
How to remortgage
First things first, you need to find a deal. You can either speak to your current lender or shop around for a new mortgage. A mortgage broker can suggest deals that best suit your circumstances.
If your circumstances have changed at all, perhaps because your income has gone down, make this clear to your broker. You need to be sure that you’ll be able to afford your new mortgage repayments – it’s something a lender will consider closely when you apply. They won’t let you over-stretch yourself, as if your financial circumstances changed again and you could no longer pay, your property would be at risk of repossession.
"Negative marks that have appeared since you took out your mortgage could act against you."
Check your credit history too. Any negative marks that have appeared since you took out your mortgage could act against you, even if you’ve never missed a mortgage payment.
Once you’ve chosen your deal and checked you can afford it, you can begin the application process. You should expect this to be much the same as applying for a mortgage the first time round. The biggest difference is that rather than paying a deposit, the equity you’ve built up in your home will be used.
The lender may request a valuation of your property, particularly if this has changed a lot since you bought it. They will use this to get an accurate idea of how much equity you have.
And you may also be asked to provide paperwork to support the information you’ve given in your mortgage application – just as they might have when you applied the first time. This could include a few months of payslips to act as proof of earnings.
"Remember, you may have to pay an early repayment change."
If your application to remortgage is accepted, you’ll be sent an agreement in principle. If you are switching to a new mortgage before your current deal comes to an end, you’ll need to let your current provider know – and, remember, you’re likely to be asked to pay an early repayment change.
Once you’ve supplied the paperwork requested of you, paid any fees and your lender has the survey results back, your application is complete and you’ll receive your formal mortgage paperwork.
For more information on remortgaging, read this.
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