The remortgage process can be scary but it’s a great opportunity to save money, access equity or get a better deal that suits you. Whether you’re exploring remortgage options to lock in a lower interest rate, change your mortgage term, or raise money for home improvements, understanding the key factors is crucial.
Here’s a step by step guide to help you navigate the process and get the best remortgage deal.
1. Define Your Goals
Before you start the remortgaging process you need to know why you want a new mortgage deal. Most people remortgage for:
- Lower Interest Rates: Switch from your lender’s standard variable rate to a new deal with a lower rate and you could save hundreds per month.
- Accessing Equity: If your property’s value has increased you could release more equity for home improvements or other expenses.
- Changing Terms: From variable to fixed rate mortgage for predictability or extend or shorten your mortgage term to suit your current situation.
Defining your goals means you get the right remortgage for you.
2. Review Your Existing Mortgage Deal
First review your current mortgage deal. Key things to consider:
- Interest Rate: Are you on a fixed rate or variable rate?
- Early Repayment Charges: Are there exit fees for paying off the mortgage early?
- Outstanding Balance: How much equity is left in your home?
Knowing your current deal helps you decide to switch lenders or stay with the same lender.
3. Loan to Value
The loan to value (LTV) ratio is the percentage of your property’s value you’re borrowing. Most lenders offer better remortgage deals to borrowers with lower LTV ratios. To get the best deal:
- Calculate how much equity you have in your home.
- Get a new property valuation if needed.
- Try to reduce your LTV by paying off as much of your existing mortgage as you can.
4. Fees Involved
A new mortgage deal may have great rates but consider the extra costs involved in the remortgaging process, such as:
- Arrangement Fees: These can be hundreds or thousands of pounds depending on the lender.
- Legal Fees: A solicitor or conveyancer is required for the remortgage application.
- Valuation Fees: Some lenders offer free valuations but check.
Don’t forget to factor in exit fees if your current lender charges for leaving your current deal early.
5. Compare Remortgage Deals
Shopping around is key. Look at:
- Fixed Rate Mortgages: For stability these mortgages fix your interest rate for a set term.
- Variable Rate Mortgages: These often start with lower rates but move with the market.
- New Lender Incentives: Some lenders offer cashback or free legal work.
Using a mortgage broker can make the comparison process easier, they can find deals that match your financial situation and credit history.
6. Check Your Credit Score and Financial Situation
Lenders use your credit score to assess your risk. Before applying:
- Check your credit file for errors.
- Paying off existing debts or credit commitments.
- Not applying for new credit before your remortgage application.
A good credit history will make you more attractive to most lenders and could get you lower rates and better terms.
7. Current Lender or New Lender
You can remortgage with the same lender or switch to a new lender. Both options have pros and cons:
- Staying with Your Current Lender: A product transfer means no legal work or property valuation required, it’s the simplest option.
- Switching to a New Lender: This may get you better rates or terms but more paperwork and extra costs.
8. Your Monthly Payments
Make sure the new mortgage deal fits your budget. Lower monthly payments may mean a longer term and more overall cost. Higher monthly payments over a shorter term will save you money in the long run.
9. Remortgaging Process
The remortgaging process involves:
- Reviewing your current situation and goals, including financial circumstances, current mortgage provider, and existing lender.
- Comparing remortgage deals and applying for the best one.
- Submitting financial documents like months’ bank statements, proof of income and details of your existing mortgage.
- Property valuation.
- Receive a formal mortgage offer from your chosen lender.
10. Get Professional Help
A mortgage adviser or broker can walk you through the remortgaging process, explain the terms of your new deal and help you avoid any traps.
Firms like Eden Hawk Cardiff can help you get the best remortgage deal for you.
Summary
Re-mortgaging is a great opportunity if done correctly. By knowing your goals, understanding your loan to value ratio, improving your credit history and comparing deals you can get a new mortgage that suits your current situation. Remember professional advice from a mortgage broker or adviser will make the process easier and save you time and money.
Whether you want to save money, raise money for home improvements or simply get better terms, being proactive will get you a successful remortgaging.
