Remortgage
What is a Remortgage?
A remortgage is when you switch your mortgage from one lender to another to get a better deal. It’s as simple as that!
Since the credit crunch it’s become harder to remortgage, but with interest rates at record lows there are still lots of great deals out there so it pays to see what’s on the market.
Why Remortgage?
To save money!
If you cut your mortgage rate by 1% you would save around £120 a month on a £150,000 mortgage.
There are also practical reasons for remortgaging, such as changing the type of mortgage you have to something more flexible or borrowing extra to pay off other debts (e.g., credit cards) that are being charged at a higher interest rate.
Record low interest rates
Right now interest rates are at a record low. The consensus amongst forecasters, however, is that they will have to go up some time later this year (2011).
What that means is that if you’re on the bank’s SVR or Standard Variable Rate chances are you’ve got a pretty good deal right now. But if interest rates do go up the cost of your mortgage will go up in step with them, so it may make sense to remortgage to a fixed rate deal.
Do I have to switch lender?
No, not necessarily. Though it’s quite common to switch lender when you remortgage it’s worth asking your existing lender for a better deal in exchange for keeping you as a customer.
How much does remortgaging cost?
The legal fees for remortgaging are surprisingly cheap.
A good reputable solicitor will be able to do the legal work on your remortgage for around £300 – £350. And that’s including vat and expenses! (To get a free instant Remortgage quote click here.)
Please note that if your property is leasehold you should expect to pay about £50 more than this.
Watch out for other costs from your existing lender (such as exit fees and early redemption fees)
and your new lender (such as arrangement fees and valuation fees).
If you can make a significant monthly saving it will still usually pay to go ahead and remortgage, but it’s important to be aware of any extra costs.
Is it always a good idea to remortgage?
Not always.
As mentioned above, right now most people on the bank’s SVR are paying less than say a fixed rate mortgage, because of historically low interest rates. That’s pretty unusual, however, and won’t last forever.
Also, if your mortgage is very small your savings may not outweigh the costs of remortgaging. Once your mortgage is down to around £50,000 – give or take – you should look very carefully at the maths to see if remortgaging makes sense.
What to do next
1. Find out from your existing lender how much it would cost to redeem your mortgage and tell them that you’d like a better deal.
2. Compare the remortgage deals that are available (not every mortgage product is available when remortgaging) with any offer you have from your existing lender.
3. Work out the total cost of a) redeeming your existing mortgage, and b) remortgaging.
4. Compare the cost (3.) with the monthly savings that you will make. Remember, this is not an exact science as interest rates change.
5. Decide whether it’s worth switching and if it is put in your application.
6. Find a solicitor for the legal work on your remortgage (click here for instant remortgage quotes).
7. It usually takes around 1 to 2 months for a remortgage to complete.
8. Decide what you’re going to do with the money you’ve saved!
We work with a panel of Recommended Solicitors who offer “fixed fee” remortgage quotes on a “no completion – no fee” basis (i.e., if your remortgage does not complete you don’t pay any legal fees!). Click here to get highly competitive instant remortgage quotes.