Why do people remortgage? People remortgage for several reasons:
• Because their old deal has expired (e.g. a two-year fixed rate deal has come to an end)
• Because they are on a poor deal costing them too much money in repayments
• Because they would like a new mortgage for a higher amount to raise some extra cash.
After having been on a good fixed-rate deal for two years (for example), people can easily fall into the trap of staying with the same provider but slipping onto the dreaded standard variable rate. This will be much higher than the best deals on offer across the market – even in these troubled times for mortgage holders. The answer is to remortgage.
Remortgaging entails looking at the mortgages which are available and choosing one that suits your circumstances best. This may be with your current lender, but the chances are that it will be with a different lender. Do not place any value on loyalty. Your loyalty is highly unlikely to be rewarded by your lender.
If you were able to cut 1% off a £100,000 mortgage, you would save about £80 a month from your repayments. That’s a great reason to seek a remortgage.
The credit crunch has undoubtedly had an impact on remortgaging, but that does not make a good reason for taking no action about your mortgage if you think your monthly repayments are too high. Yes, the number of mortgages available on the market has been reduced; and, yes, mortgage providers are more reluctant to lend now than they were this time last year.
However, as an existing homeowner, it is very possible that you will be in the happy position of having some equity in your home, even in the current climate of reducing house prices. That effectively gives you the deposit that most lenders require from borrowers these days, and the higher your equity the better your chances of getting a mortgage at all, and one with a favourable interest rate.
To begin the remortgage process, get a redemption statement from you current lender, which will tell you how much you still owe. Use an advisor or broker to get new lender. You will have to have your house valued, and you will have to go through the whole process, including legal work. All these carry fees, so be sure to include these in your financial calculations.
To achieve the best deal it is sensible to take advice from a mortgage broker or advisor. Even in a diminished market these professionals will have access to mortgages not available on the high street, or even via the internet. They will seek to understand your circumstances and requirements to ensure that you get the best deal for you.
