Remortgaging is one way to reduce your monthly mortgage payments and release equity. But there are a number of points to consider before moving ahead.
Home Legal Direct have put together guidance on what to consider.
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Research the cheapest and best mortgage deals that are available to you suited for your own circumstances and use a comparison site to do this. Use comparison sites that include direct only deals and not just deals that are available via a mortgage broker.
Consider using a mortgage broker as they can get access to better deals and have a good understanding of the market place. But do look at their fees and how the mortgage broker works as the way they operate can vary.
An early repayment charge and a ‘deeds release fee’ also commonly called an ‘admin charge’ are two fees to look out for if moving lenders to a new mortgage product particularly if you remortgaging early. An early repayment charge is usually calculated as a percentage of the outstanding mortgage balance and can be as much as 5%. There will usually be a tie-in period so check if this is still in place or when it is due to end on your current mortgage deal. The admin fee is the cost for the current lender to transfer the property’s title deeds to your conveyancer. The amount charged can vary so do check.
The fees lenders charge can be expensive. Some lenders will offer attractive interest rates, but their fees can be high to compensate for this which can impact your monthly payments. For example, if a lenders fees are £1200 then over 12 months you would be adding £100 to your monthly spend so factor this into what you can realistically afford.
Affordability checks apply in the same way as if you were looking to move home. This means the lender will look at your bank statements and financial outgoings such as any loans you have in place. Plan for this by keeping you spending contained and not over spending and avoid taking out a new loan on a car for example. This may affect getting the remortgage deal you want.
Check your credit score as this has a big impact on if you will be accepted for a mortgage. Never miss a repayment and avoid applying for any loans or credit cards as this will give a negative score to your credit rating. Keeping personal details consistent can also help.
Consider what type of remortgage product is right for you. Should it be fixed or a tracker or discount? Fixed gives security and allows you to budget but these can be more expensive. This is where research and understanding your own personal financial circumstances and comfort level is important.
If you have any queries, please don’t hesitate to contact us and we will be happy to guide you through the process and answer any questions you may have.
Click here and find out the conveyancing cost for a remortgage.