What To Look Out for When Re-mortgaging

According to a survey carried out by Ipsos Mori, 31% of people who rent or have a mortgage find that payments take up more than a third of their total household income. Even if your mortgage payments are below this level, if they are a significant part of your budget then getting the best possible deal could be a significant boost to the family finance and ultimately to your personal wealth. Like other businesses, mortgage lenders need to be on the lookout for new customers. To attract them, lenders may offer very attractive rates for a limited period. These are called introductory rates. In the UK these generally last about two to five years. After the introductory period has ended, the mortgage will continue on the lenders’ standard variable rate. At this point borrowers have essentially three options: stay on the SVR, re-mortgage with their existing lender or re-mortgage with a new lender.
What To Look Out for When Re-mortgaging
Staying on the standard variable rate can sometimes be the best choice and the cheapest option. Although there are some very healthy potential savings to be made while re-mortgaging, it is always worth remembering that there are also costs involved as well. As you are essentially taking out a new mortgage, you will be looking at paying the same sort of fees as you did when you first brought your house. Specifically, your home will also need to be properly revalued and there will be legal paperwork to be processed. It is also entirely possible that your current lender will charge an exit fee (to close your mortgage) and there may also be an early repayment charge as well. This is basically a fee to compensate the lender for your decision to exit the mortgage early. Some mortgage deals may offer to pay the upfront costs of any or all of these, but this may result in a higher rate. Staying on the SVR makes sense if the cost of setting up a new mortgage outweighs the savings.

Re-mortgaging with your existing lender can be easier than you think as new rules introduced in 2014 mean that you should only take out a mortgage you can afford to pay back. In principle, these rules apply to anyone taking out a new mortgage, including those re-mortgaging. In practice, lenders are permitted a degree of flexibility when dealing with existing customers looking to re-mortgage. In short, lenders are permitted to issue new mortgages to existing customers who technically wouldn’t be accepted under the new rules, provided that the customers are simply changing to a better deal.

Re-mortgaging with a new lender may be difficult to find a new and better deal, other people are in a much stronger position when they come to re-mortgage. Those that have been paying off their mortgage over the last two to five years may have built up equity in their home and may have benefited from price rises as well. This means that when they come to re-mortgage, their new mortgage may be a small percentage of the value of their home. This is called a smaller loan to value and is basically the same as being able to put down a larger deposit; Borrowers may therefore be eligible for better deals than they were the first time around. At the very least, investing some time looking at what’s available can help when negotiating with an existing lender.

Understanding the pros and cons of remortgaging is the most important thing and the basic golden rule is to add up all the costs and look at the savings on offer; Then you will be able to see which is the higher number. Those who would like someone to help with this process can get professional financial advice from a qualified financial advisor who will be happy to help you get your financial house in order.

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If you are looking for further advice and guidance in re-mortgaging, please make sure you get in contact with our team who will be able to help with what you need. Barrett Mortgages doesn’t just offer help and advice for re-mortgaging we also offer this for first-time buyer mortgages, buy to let mortgages, equity release and many more. We were founded by Darren Barrett in 2009, during some of the hardest market conditions the industry has seen. The unparalleled, clear, trustworthy, honest and upfront service offered by Barrett Mortgages has meant our business has thrived during these times when clients have needed more individual and specialist help. If you want to know what our customers think about our service, please make sure you go and check out our Google reviews page.