If you’re a homeowner in the UK, you may have considered remortgaging your home at some point.
Remortgaging is the process of switching your existing mortgage to a different lender, usually to achieve a better interest rate, lower monthly payments, or access to cash equity in your home. Whether you are a first-time remortgager or looking to remortgage again, there are several key tips to keep in mind to ensure a successful and stress-free process.
Check your credit score. Before you begin the remortgage process, it’s a good idea to check your credit score and credit report. Your credit score is a numerical representation of your creditworthiness and used by lenders to assess the risk that they take by lending you money. A good credit score can help you to get a better interest rate on your mortgage so it’s worth checking and taking steps to improve your score if necessary.
• Shop around - With so many different mortgage lenders and products available, it’s vital to shop around and compare different options. As tempting as it might be, don’t settle for what your current lender offers you to stay with them. Look at the interest rates being offered, fees and terms and conditions of each mortgage to find the best deal for you. Having a broker to do all this for you will save a lot of the time and effort for you personally and they have systems which can check an array of lenders and their offerings within seconds.
• Consider the fees - Remortgaging can be a costly process with fees such as conveyancing/legal fees, valuation fees and early repayment charges to consider. Make sure you factor these costs into your budget and compare the total cost of each mortgage, not just the interest rate. Lenders often offer products which include the basic legal costs and valuation fees and some even offer cash backs to make their products more attractive.
• Be realistic about your budget - Remortgaging can reduce your monthly mortgage payments but it’s important to be realistic about what you can afford. Make sure you consider your monthly income and expenses and create a budget to see what you can afford to repay each month.
• Consider saving money long term - It’s always tempting to chase a cheaper payment when remortgaging but if when considering your budget you can afford to pay more, why not consider reducing the loan term? Here’s an example of how much you can save over the duration of the loan term by reducing the term -
£150,000 loan over 30 years at a rate of 3.5% would cost £674 per month and £242,579 over the term.
£150,000 loan over 28 years at a rate of 3.5% would cost £701 per month and £235,609 over the term.
That’s a saving of £6,970 by reducing the term by 2 years! The monthly payment is increasing by £27 but that’s a huge saving.
• What is your home worth? Lenders will assess the current valuation of your home before they offer you a remortgage. You can establish your current lenders valuation by accessing their online system or calling them. This is a good guide to use to determine the value. Every remortgage will involve a valuation whether it’s electronic/desktop or a physical valuation. It’s important to determine the correct valuation as this will impact the interest rate you can secure.
In conclusion, remortgaging your home can be a great way to reduce your monthly payments, access equity in your home for home improvements, a new car etc or simply get a better interest rate. By following these tips, you can ensure a smooth and successful remortgage process.
If you’re looking for advice on your remortgage, please get in touch with us.
The Mortgage Lodge
February 2023