Should I remortgage now and how easy is it?
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If you're wondering what a remortgage means and whether to do it now to beat the expected summer rate rises - join the crowd. We ask an expert to guide us through the lingo.
Switching mortgage providers is just like switching a service provider such as your broadband or electricity, says Ian Goody, independent adviser for Norwich-based Premier Financial Group.
With an explanation that simple, we ask more remortgage questions.
What is a remortgage?
A remortgage allows you to switch lenders in search of a better mortgage deal.
Do I only remortgage when I move house?
No, when you move house that loan is a mortgage. A remortgage is when you stay in the same house but switch lenders.
Why would I remortgage?
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At the end of a product tie in period (such as a fixed rate), you will automatically revert to a standard variable rate, which is usually much less attractive.
Can remortgaging save money?
Definitely, that is the main purpose of a remortgage. Other reasons include capital raising, buying out equity holders (such as ex partners) and gaining peace of mind by remortgaging to a better fixed rate with another lender.
Can I remortgage to raise cash to spend?
Yes, you can apply for more money than your current mortgage total although some lenders have limits on the purposes of raising capital.
Can I raise money to pay off other debts such as credit cards?
Yes, although not all lenders will accept this. Be aware that some brokers whose status is as Appointed Representatives (as opposed to Directly Authorised) may be restricted from advising you on a full range of lenders.
The benefit is that the interest rate on a mortgage is lower than on most loans or credit cards. If you add it to your mortgage you will be paying it off over a much longer period of time and therefore will probably end up paying more in the long term. However, most lenders allow you to overpay up to 10% of your mortgage each year without penalty – so in most cases you can use this option to pay more and pay off the debt over the same term at a cheaper rate.
When would I remortgage?
Typically any time when there is no Early Redemption Charge (ERC) on your current mortgage, such as the end of a fixed rate period or if you are already on a standard variable rate. Most find it prudent to look into remortgages three months before their existing deal ends to secure attractive interest rates.
Is it easy to remortgage?
Yes, certainly if you use a mortgage adviser. They will select a new lender beneficial to you and organise everything. A solicitor will need to be involved but most lenders offer a fee-free conveyancing service.
What do I need?
You need to prove affordability to the new lender and the usual criteria such as identification and proof of address.
When I'm remortgaging who values my home?
The lender who you will switch to, which is generally free of charge. The lender may do a 'drive-by' which means they just check there is a house and it looks about the value you declared! Some may do an estimate valuation making the process even more speedy.
Do I need to organise a lot of paperwork to remortgage?
No. Just proof of income and affordability. A mortgage adviser is responsible for his/her advice, so they will ask you a series of questions either over the phone or face to face.
How long does it take to organise a remortgage?
It generally takes around four to eight weeks although it can be completed quicker if necessary.
How do I know if I have a good remortgage rate?
Don't get caught out hunting for the 'best rate'. The best rate is not necessarily the best deal as it might come with extra fees or hidden charges or even higher Early Redemption Charges. A good mortgage adviser will tell you the best mortgage deal for you, not the best mortgage rate.
Should I shop around before I agree my remortgage rate?
A mortgage adviser does the shopping around for you, so find one that you trust.
Thanks to adviser Ian Goody of Premier Financial Group for help compiling this advice.