Guide to Remortgaging UK

Remortgaging has become increasingly popular in recent years as lenders look for ways to reduce the value of their monthly payments. Remortgaging basically involves switching your mortgage from your existing lender to a new mortgage lender. Often people’s existing mortgage is fixed to the financial institutions SVR (Standard Variable Rate) However this is not usually the best mortgage to have. Mortgage lenders often have better deals such as tracker mortgages, flexible  mortgages and discounted mortgages.

A good question is why mortgage companies have these many different types of mortgages. The answer is that often they take advantage of borrowers inertia. Basically this means that they rely on most borrowers not making the effort to change their mortgage. Therefore they have no incentive to offer them a competitive market. However there is a certain section of the market; people looking for a mortgage and people looking to remortgage who are looking for the most competitive deal. Therefore to these groups of borrowers the financial institutions will offer the most attractive mortgage that they can in order to keep their custom. Therefore there are often significant savings to be made from switching to another mortgage.

Discounted Mortgage

Some people like to remortgage in order to be able to be able to take equity from the value of their house. This involves lending a larger amount. E.g If your initial mortgage was from £100,000 but now your house prices has risen to a value of £150,000 you could in theory remortgage your house to a value of £150,000 giving you £50,000 to spend in cash. This can be very useful if you need to borrow a large amount of money. The interest rate on a mortgage is usually lower than a standard loan. This is because a mortgage loan is secured against the value of your house. However it will increase the length of your mortgage leading to higher interest payments.

Things to look out for when remortgage your Home.

  1. Examine your current monthly payments and interest rates. If you are on a standard variable mortgage then it is likely you will be able to find something cheaper.
  2. Examine to see whether you have any leaving penalties for switching your mortgage. For example many fixed rate mortgages have a certain time period where moving your mortgage incurs a penalty. It is probably going to be worth waiting for this period to elapse.
  3. Examine the setting up charge for a new mortgage. Quite often new mortgages have significant setting up fees. However this does need to be offset against the time of your new mortgage and how much you will save from your monthly payments.
  4. Examine the monthly interest payments of any new mortgage. Also look for any penalty clauses or future charges for moving your mortgage.
  5.  Valuations for new mortgages usually cost between £300-£400. Legal fees also are likely to cost between £300 to £400. Some of these fees may be waived as an incentive to take a certain mortgage. Also these fees are likely to be less if you remortgage with your same lender.

Trouble borrowing enough? Try a self Certification Mortgage

 

 

Guide to Mortgages and Remortgages