Remortgaging your home is a great way of releasing funds that will allow you to pay for a major home improvement task such as getting a house extension, adding a conservatory to your property or converting a loft or garage. But these aren’t the only reasons for deciding to remortgage your property. If you have a fixed term or tracker mortgage that is coming to the end of its deal, remortgaging is an effective way of making sure you don’t end up stuck with unfavourable rates care of your lender’s SVR.
Another reason to remortgage is that due to a change in circumstances your current mortgage may no longer suit your needs. Getting a new mortgage deal could potentially provide you with a more flexible or extended mortgage that is more appropriate for your new circumstances.
What is remortgaging?
Remortgaging is the process of switching the amount you owe on an existing mortgage to a new arrangement, ideally one that is more preferable and appropriate for your future needs. It is not to be taken lightly, as a typical remortgaging arrangement means that you will continue to owe money for a longer period of time – 25 years being the average.
Remortgaging: important things to remember
Before you remortgage your property, check to see whether there are any penalty fees for leaving your current mortgage. You should make sure that you are fully informed and well prepared for any administration costs and fees that may be added during the remortgaging process. Recently, lenders have started to increase the fees that they charge when people want to change mortgages. You should always make sure that you have calculated the total fees that you will need to pay in order to set up a new mortgage and cancel an old one. It is possible that the total of such fees will make remortgaging your home prohibitively more expensive.
Not everyone will be able to remortgage their property. Those in most danger of being refused by lenders are people whose property is in negative equity, i.e. due to a fall in the value of the property, they find themselves paying more in mortgage repayments than the property is actually worth. Also, since the credit crunch a few years ago, lenders have become much stricter in their lending criteria. People who had no problems getting a 100% mortgage ten years ago, may find themselves being refused a second mortgage in the current economic climate.
Due to the risks involved in remortgaging your property, and the potential expenses involved in switching from one mortgage product and lender to another, it is a good idea to seek independent advice on whether remortgaging is the best option for you.
Remortgaging your home
It is a good idea to discuss your plans with your current lender. They may be able to offer you an improved deal, and if you can stay with the same lender, it might very well save a lot of time and hassle. Otherwise, shop around to find the best mortgage deal available that will suit your needs. Assuming you are going with a new lender, they will want to do a mortgage valuation on the property, which could take a few weeks or even a couple of months. You will also need to fill in an application form and provide proof of earnings in the same that you did when you first took out a mortgage – see How to Mortgage a Property for more details.