First time buyers Loan
Remortgaging is very popular. And with good reason. Whether you are switching your deal for a better rate or more suitable conditions, or increasing the size of your homeloan, there are plenty of deals available. Banks, building societies, specialist lenders and mortgage brokers can all accommodate your needs. Our handy mortgage calculators can swiftly work out how much you could save by remortgaging to a lower interest rate, or how much it would cost you to increase the size of your loan. And our Best Buy tables will give you an idea of the rates on offer for remortgaging. Bear in mind that most lenders charge fees, but some do offer fee-free deals for the cheapest remortgage available.
INTRODUCTION
Remortgaging simply means switching your existing mortgage to a new deal, often to a new mortgage lender. There are literally millions of borrowers currently paying their lender's standard variable rate (SVR). No lender's SVR will be the best deal they have on offer. Unless you have just come out of a special deal (such as a fixed rate or a discounted rate), there is nothing to stop you switching off the SVR to a lower rate or a more suitable deal. And even if you have just come out of a special deal and are obliged to pay a penalty to switch to a new one, the figures may well add up in your favour.
These days the process is easier than ever before - so why not take advantage of the situation?
CAN YOU SWITCH?
You could save a lot of money by changing your mortgage - follow these steps to see if you might be able to switch and save.
Dig out the details of your current mortgage. What type of deal do you have? If it is:
a) Variable - you can remortgage to a better deal straight away
b) Flexible - truly flexible mortgages allow you to leave when you want to with no penalty - but in many cases it will make sense to stick with a flexible mortgage,
c) Variable with a cashback - you may have to repay the value of the cashback before you are allowed to switch mortgages,
d) Variable with a discount, fixed rate or capped rate - you may have to pay a redemption penalty to switch deals,
e) Base Rate Tracker - you should be able to remortgage to a different deal straightaway.
Make a note of what it will cost to move your mortgage.
Make a note of:
a) Your current monthly repayments
b) The monthly repayment cost of the new deal you have selected
Get in touch with your lender and:
a) Ask them to work out how much you will have to pay in redemption penalties (if applicable)
b) Inform them that you are considering re-mortgaging. They may be able to offer you a new
deal to stay with them - for example by switching you on to another fixed rate with no
penalties. But still make sure you shop around as you could find something even more suitable.
Work out how much it will cost you to remortgage. Write down how much the following will cost:
a) Redemption penalties (if applicable)
b) Arrangement fees (if applicable)
c) Valuation fees
d) Legal fees
COSTS OF REMORTGAGING
Stamp duty
The legal aspects of the purchase cannot be ignored - stamp duty licks in at one per cent of the purchase price on properties costing more than £60,000, with higher percentage charges on properties costing more than £250,000. And you will have to pay solicitors fees.
Mortgage Indemnity Guarantee (MIG)
Watch out for mortgage Indemnity guarantee (MIG) charges. This is an insurance you may have to pay for which protects the lender - NOT you - in the event of you defaulting on your mortgage payments. This generally applies when you put down less than a 10% deposit.
Other costs
Don't forget to budget for other purchase costs, including the lender's valuation fee and your own survey, plus buildings and contents insurance. The estate agent will demand a fee for selling your home, which is typically around 2 per cent but can vary.
The removals company will need to be paid, although you may decided to hire a van and do it yourself for a fraction of the removal company's fee, but for a whole lot more hassle. Finally, you'll probably also need money to pay for furniture and furnishings once you have moved in.
The total bill may run to thousands of pounds, depending largely on the property price and the size of your mortgage, and if you are selling a home through an estate agent.
Estate agents fee
Some estate agents may work for a flat fee, but the vast majority work on commission
Commission varies from one per cent to three per cent of the sale price of the property
If you have used one agent (a Sole agent), they get all the commission
If you have used joint sole agents they split the commission
If you have used multiple agents, whoever closed the deal gets the commission
Weigh up your savings versus your costs. Bear in mind that some lenders offer specific remortgage packages where they pay for your legal and valuation fees, so all you need to do is compare monthly repayment costs (unless there are redemption penalties involved). Ideally, remortgaging should save you money straightaway, but if there are costs involved it may take a number of months to recoup your layout