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Remortgaging your property

The dos and don’ts of remortgaging your property

Remortgaging your property describes the process of taking out a new mortgage on a property that you already own, in order to replace the current mortgage or to borrow money against your property. The benefits of remortgaging can include gaining a better interest rate, saving money and providing money to those who want to pay for loans or house reparations. With around a third of all home loans in the UK being remortgages, we take a look at the dos and don’ts of remortgaging your property.

DO research the market

As with everything in life, a little research will always help you make the best choice. It’s a good idea to meet with your mortgage broker or an advisor to discuss the various options. Meeting at least six months before you plan to remortgage your property will also help you to prepare and make the most of the best deals around.

DO remortgage if your current deal is about to end

If your fixed rate term is about to end, it’s likely that your lender will put you on a standard variable rate which can often be higher than your old interest rate. There’s no reason why you have to stay with your original lender so start looking at least 15 weeks before your current rate ends.

DON’T stay with your current lender just because it’s easy

Remortgaging a property has a number of benefits and you may save money as a result of decreasing your monthly payments and interest rate. The industry is competitive and you may find that your existing lender isn’t the cheapest. Remortgaging opens up a number of new options. For example, if your wage has increased since you first arranged your mortgage, you may find that you can now borrow more. However, if your earnings have reduced you may be unable to secure a new mortgage. If the latter applies to you, switching plans with the same lender should be considered.

DO shop around for the best deals

Don’t choose the first plan that you find but instead look around and compare deals. While one may have low monthly payments, a plan that allows you to pay your mortgage off quicker could work out to be the best option over time. Your mortgage lender may offer you an attractive retention product but the best deals can often be found when switching lenders. Plus, if you’re looking to borrow more money, an advance loan from your current lender (or an additional mortgage on the same property) is more appropriate than remortgaging. Before making a decision, ensure you’ve considered all of the options.

DON’T guess when it comes to figures

While you may have a rough idea of your property’s value, it’s crucial that you have an accurate valuation. If your home has increased in price since your first mortgage, when it comes to remortgaging, the loan-to-value will probably reduce. Ultimately this means that you are less risky and interest rates may drop. An accurate valuation is also important if you aim to release equity but this means you’ll also be taking out a larger loan and often paying more interest. If you’re simply looking to pay for home improvements or a holiday, a short-term bank loan may be more beneficial.

DO prepare your paperwork

When it comes to remortgaging, the process is very similar to getting a new mortgage. There’s lots of paperwork so the more organised you are, the quicker the process. ID, proof of income, proof of address and bank statements will all be needed so it’s worth getting them together and filing them in a safe place.

DON’T forget about the fees

Remortgaging has a number of associated fees so before starting the process you must decide whether it makes financial sense. There may be a charge for leaving your contract early if you’re still in the fixed-term period and there’s often an exit fee. As well as this, your new lender may also charge for set-up fees. Legal fees should also be considered.

DO consider remortgaging if you want to overpay and your lender won’t let you

Perhaps you’ve come into some money or had a pay rise and now you want to pay some extra money, but your current deal will only allow a small overpayment or doesn’t allow for any overpayment. Search around for a deal that allows a little flexibility when it comes to overpaying.

And remember,

Take your time and weigh up all the options. Many people believe that remortgaging is about choosing a new rate but there are lots of other factors. Meet with a mortgage broker for the best advice and to ensure you’re getting the most out of your finances.

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