Remortgaging

When you come to the end of your special deal, it’s worth while looking to the market to see what else is on offer. Lenders are keen to attract borrowers with a large amount of equity in their homes who can demonstrate a good payment history.

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Five Point Plan

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Write to your existing lender and ask for a written redemption statement. This will indicate the exact outstanding balance of your loan and will show any penalties or fees to be charged for redeeming your mortgage.

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Calculate what the legal fees involved will be. These will vary according to the value of the property and the solicitor used.

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Look at the new mortgage offer, including the small print, and ask for a written statement of what your new repayments will be, showing any discounts and all the costs that will be incurred, such as the HLC and any arrangement fees.

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Work out how much you will save each month by taking the repayment for the new loan away from the old repayment – don’t forget to take the standard variable rate (SVR) that the new loan will revert to into consideration as well, particularly if the dis­coun­ted tracker or fixed rate is only for a brief period of time.

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To judge whether or not remortgaging is worthwhile, compare the costs with the savings – but don’t forget that the costs will be payable upfront while the savings will accrue over a period of time..

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Remortgaging is a good way to escape high variable or fixed interest rates and take advantage of some of the cur­rent fixed-rate, tracker or discount mort­gages, which have much lower rates.

It is also a way to raise funds for an expensive pur­chase. If you have owned your pro­perty for a few years, it could be worth much more than your outstanding debt. By taking out a new, larger mortgage you can release money to spend as you choose.

Remortgaging may also appeal if you are on a variable rate and believe interest rates are about to rise. You can move to a fixed-rate deal before this happens.

The costs
Remortgaging costs money, and before applying for a new deal you should find out just how expensive it is going to be. Common expenses are:

• Arrangement and administration fees for the new mortgage. Mortgage arrangement fees can vary from £150 up to £2,000
• A mortgage valuation fee, which tends to be between £130 and £300, depending on your chosen lender and the value of your property
• Any early redemption penalty on the existing mortgage. This can be from three to six months’ additional interest payments if you redeem the mortgage within a certain period of time after taking it out
• The higher lending charge. If the amount you are borrowing is more than 75 per cent of the property’s value (loan-to-value or LTV) you may have to pay a one-off higher lending charge (HLC) premium on the new mortgage
• Solicitor’s fees – unless your new lender offers free legal work
• Land Registry and local search fees

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If you have negative equity in your pro­perty, you will have to find the additional money that you owe on your old mortgage when you take out a new one. If this is the case, don’t remortgage unless you really have to.
Visit www.whatmortgage.co.uk for a step-by-step guide to remortgaging and to find a new mortgage.

Flexible
If it’s been a while since you last took out a mortgage, you may find that the option available to you now include flexible mortgages.

These deals give you greater options when it comes to managing your mortgage – for example giving you payment holidays or underpayments, as well as the chance to increase your monthly payments when you can afford them or make lump sum repayments if times are good. This means you have the opportunity, by making additional payments, of saving thousands of pounds in interest and paying off your mortgage early.

If you are taking advantage of the opportunity to make underpayments or take payment holidays, you can make the most of fluctuations in your income, or in your payments, to allow your mortgage to fit in with your lifestyle.

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