Remortgaging is the process of switching your existing mortgage to a new deal, either with your current lender or a new one.
There are many reasons to consider remortgaging, whether you;
- Have a current deal that’s coming to an end and don’t want to be transferred to your lender’s Standard Variable Rate.
- Want to buy another property whilst keeping your current one.
- Want to do some significant home improvements.
- Want to lower your repayments.
It’s a common strategy for homeowners in the UK because the benefits of remortgaging mean that you could save money on their mortgage repayments, release equity from their property, or finance home improvements.
However, remortgaging can be a complicated and time-consuming process, and if you’re not careful, you could end up paying more than you need to.
Before you start looking into remortgaging you must know what the new mortgage will mean in relation to your current situation, especially how much you owe your current lender and how much your home is worth.
In this article, we’ll provide you with some top tips for remortgaging to help you get the best remortgage deal possible.
1. Check your credit score
I hear you, why would you need to go through this again, you were already approved for your mortgage in the first place.
Your credit score is always a key factor that lenders consider when assessing your eligibility for a mortgage. BUT, when it comes to remortgaging, have your finances changed since you originally took your mortgage out?
Review the report carefully and make sure that all the information is correct. If your credit score is low, you may want to improve it before applying for a remortgage.
2. Shop around for the best deal
One of the biggest mistakes that homeowners make when remortgaging is not shopping around for the best deal.
Many borrowers assume that their current lender will offer them the best remortgage deal, but this is not always the case. It’s essential to compare different mortgage deals from a range of lenders to find the one that suits your needs.
You can use comparison websites such as MoneySuperMarket, Compare the Market, or Uswitch to compare rates and fees from different lenders, but for a more tailored approach, one that’s specific to you, you may want to speak with a whole-of-market mortgage advisor.
When comparing deals, make sure that you compare like-for-like products, including the interest rate, term, fees, and repayment type. You should also consider the lender’s flexibility in case you need to make changes to your mortgage.
3. Consider the total cost of remortgaging and all fees
When comparing mortgage deals, it’s important to consider the total cost of the mortgage over the term of the loan, not just the interest rate. This includes any fees, charges, and other costs associated with the mortgage.
Some lenders may offer a lower interest rate but charge higher fees, which can increase the overall cost of the mortgage.
Other lenders may offer a higher interest rate but fewer fees, which can be more cost-effective in the long run.
You may also want to consider how flexible the lender is in terms of repayments, or if you plan to sell in a few years. Lenders can apply some excessive fees.
Likewise, you may be considering some home improvements which could be paid for by releasing mortgage equity.
4. Calculate the equity in your property
If you’re looking to remortgage to release equity from your property, you’ll need to calculate how much equity you have.
Equity is the difference between the value of your property and the amount you owe on your mortgage. For example, if your property is worth £300,000, and you owe £200,000 on your mortgage, you have £100,000 of equity in your property.
You can release equity by remortgaging to a higher loan-to-value (LTV) ratio, which means borrowing more money against the value of your property.
However, you should be aware that borrowing more money will increase your monthly repayments and the total cost of the mortgage.
5. Consider the term of the mortgage
The term of your mortgage is the length of time you’ll be repaying your loan. Most mortgages in the UK have a term of 25 years, but you can choose a shorter or longer term depending on your needs and budget.
If you choose a shorter term, you’ll pay off your mortgage faster and pay less interest over the term of the loan. However, your monthly repayments will be higher.
If you choose a longer term, your monthly repayments will be lower, but you’ll pay more interest over the term of the loan. Therefore, it’s important to consider your financial goals and budget when choosing the term of your mortgage.
6. Consult a mortgage broker
If you’re unsure about the remortgaging process or want to find the best deal possible, it’s a good idea to consult a mortgage broker.
At the Online Mortgage Guru, we can help you find and compare mortgage deals from a range of lenders. We’ll quickly narrow down your options from whole of market lenders and discuss with you those deals that are most suitable to your circumstances.
If you’re looking to remortgage there are a lot of things to consider. Not only are you looking for the best mortgage rates, but you also need to consider the overall cost of the mortgage over the duration of its term and any associated charges (i.e valuation or legal fees).
Contact us today at Online Mortgage Guru on 0345 3669799 or email us via info@theonlinemortgageguru.co.uk and we will put you in touch with a suitable specialist to handle your enquiry with no obligation.
