For some the idea of remortgaging is an off-putting one and many would rather stay with their current lender than undertake the hard work of finding a new deal, talking to lenders, having their home revalued and filling in the paperwork.
But according to the personal finance magazine Moneywise, moving a mortgage is not the complicated, onerous task that many people think it is and it could end up saving homeowners significant amounts of money.
Find a new mortgage deal
Editor Rachel Williams said remortgaging is “a lot simpler than people expect”, pointing out that “it’s nowhere near as stressful as buying a house in the first place”. And she urged anyone paying their lender’s standard variable rate at the moment to shop around for a better deal.
“There are a lot of people sitting on mortgages they’ve had for ten to fifteen years, but you’re throwing money down the drain, basically,” she warned. “On a £100,000 loan you could probably save a couple of hundred pounds a month depending on the current rate you’re paying.”
So where should homeowners start if they decide to remortgage? According to Williams the first thing someone should do is look at what their existing lender is offering and talk to them about the different options and mortgage rates available.
Find a best-buy mortgage
“The easiest way is remortgaging with your existing lender, because then it’s just a case of signing a few forms and being transferred,” she explained. However she added that if homeowners can find a better deal elsewhere they should remortgage with a better provider.
This is where price comparison sites can come in handy. Ms Williams believes they are a great way of researching the mortgage market and quickly “getting a feel” for the best deals available.
However she adds that the advice of a professional mortgage broker is always beneficial as “there’s a lot more to getting the right mortgage than just going for the one with the lowest rates”.
“We would always say, if you aren’t sure what you want, you really should get advice and speak to a mortgage broker. If you don’t know what you’re doing, especially people who haven’t remortgaged in a long while, it really is a good idea to speak to somebody.”
The most important thing to do is compare the costs of remortgaging with the potential savings to ensure that a remortgage would be worthwhile. Again this will involve shopping around as costs can vary from lender to lender. Mortgage calculators can also be a great help.
Calculate your mortgage repayments here
Once a homeowner has found the right mortgage for their needs the next step is to contact the new lender and fill in an application form. This can be done online in many cases, making the process even simpler as there is less paperwork to contend with.
The lender will then arrange to carry out a valuation of the property before making a formal mortgage offer which will be sent to the homeowner’s solicitor.
The next step is conveyancing. The homeowner must contact their solicitor who will carry out all the legal and administrative work associated with the remortgage, such as obtaining the title deeds from the existing lender and requesting a redemption statement to find out how much is owed on the existing mortgage.
Once all of this work is complete it is simply a matter of signing the documents and awaiting a completion notice, which will confirm the monthly repayments on the new mortgage. The whole process should take about a month to complete.
With experts warning of huge payment shocks for millions of homebuyers who signed their current fixed rate deals over a year ago when interest rates were much lower and who will be coming off them over the next 18 months, remortgaging will be high on the agenda for many people.
Compare and buy mortgages
Indeed, higher interest rates and the tightening of lending criteria since the Northern Rock crisis means some could see their monthly repayments soar by as much as 60 per cent if they are forced to move to their lender’s standard variable rate, according to ratings agency Standard and Poor’s.
But professional mortgage advice and time spent comparing suitable deals on the market could help homeowners to reduce the amount they repay each month and remove the threat of financial problems and debt.
“It’s easier than people expect,” Williams reiterated. “On the surface it looks like a lot of hassle when you’re talking about mortgage brokers, solicitors; it does sound like it will be complicated. But having these people to help you will make it easier.”
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