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Questions to ask when remortgaging

A   A remortgage is when you pay off one mortgage with the proceeds from a new mortgage from a different lender, using the same property as security.

A   You can save money with a Better Interest Rate, because when you remortgage at a lower interest rate than your current deal, you pay less every month. Also, remortgaging is wise when your existing deal with your lender ends, because that will automatically move your mortgage rate to the Standard Variable Rate, which has higher monthly payments.

You can also take out a remortgage to pay off your Help To Buy Loans, which usually have a higher interest rate.

Another reason you should think about remortgaging is that you can take out equity from your property when you remortgage. This gives you extra money for refurbishments or investments.

When you save money by getting a better remortgage deal, you have extra money to do with what you want, like take a much-needed holiday.

A new remortgage deal might also have less financial restrictions on them, like no exit fees in case you want to pay off the mortgage before the term ends.  

A   The best time to begin looking for a good deal on your remortgage is roughly 3 to 4 months before your current mortgage deal is due to expire, in the case of fixed interest mortgage rates. This will ensure that you do not end up paying the higher Standard Variable Rate monthly payments. If you are already on a Standard Varable Rate mortgage rate, you can switch to a new remortgage deal at any time.

A   If you are already on a low interest rate deal and there isn’t anything better in the market, then the best course of action would be to stay in your existing deal until something better comes along. However, please remember that you may not be able to access the best deals in the market, but we can help you find a better range of deals across the whole of market, completely free of charge.

Another reason not to remortgage is if your existing Mortgage deal has an Early Repayment Charge/Exit Fee on it. In such cases, it is best to wait until your deal is about to run out, so that you are not out of pocket by paying this fee.

A   Your remortgage costs will comprise of the fees that you will need to pay.

The fees that the lender will charge you may include a booking fee and an arrangement fee.

The booking fee is a non-refundable fee which lets you reserve your mortgage with the lender.

The arrangement fee is the fee the lender charges you to set up the mortgage on your behalf. This fee is charged when your mortgage completes, so if your application is declined, you will not need to pay this fee.

You will also need to pay for the valuation fees for your property.

The other fees you may need to pay are the legal fees for the conveyancing of your property that the solicitors will carry out. In some cases, the lenders may offer a free legals package, in which case you will not need to pay this fee.

You may need to pay an Early Repayment Charge/Exit Fee if you are remortgaging before your fixed mortgage interest period is over.

A   A good credit score is important for getting the best mortgage deal. The better your credit history, the higher will be your chances of getting a good remortgage deal with a lender. The lenders check your credit history to get an idea of your attitude towards money and this will help them to decide whether to lend to you or not.

Some lender will consider lending to you even if you don’t have a perfect credit score. However, these lenders will most likely charge you a higher interest rate.

That is why it is important to pay your bills on time and keeping all your financial commitments by not missing any mortgage payments or other regular payments that you are supposed to make, like car loan payments etc.

In the UK, there are several credit reference agencies (CRAs) such as ExperianEquifax and Trans Union. For a small fee, they will give you your credit report, which has your credit score. There is also Credit Karma, which does not charge any fee for producing your credit report.  

A   When you remortgage your home, you will be able to choose between two main types of interest rates.

Fixed Interest rate

In fixed interest rate mortgages, the lender ‘freezes’ your interest rate for a fixed period of time, usually for 2 or 5 years. A few lenders may offer fixed rate mortgages for 10 years too.

 During the fixed interest rate period, you will pay the same interest rate. This has the advantage of keeping your rate the same even if overall rates rise. However, most fixed interest rate mortgages have an exit fee (also known as an Early Repayment Charge), which will charge you a penalty amount if you want to change your mortgage deal before the fixed rate period is over.

If you have to move home before your fixed interest rate comes to an end, there are ‘portable’ mortgages which let you apply your existing mortgage rate to your new home.

The allure of fixed rate mortgage is that, you know exactly how much you will be paying every month, which helps you to budget and does not give you any surprises, ie. Monthly payments going up.

Variable Interest rate

Variable rate mortgages are just that: variable. This means that your monthly payments will go up or down as the interest rates rise or fall. 

The rate can be linked to your lender’s standard variable rate (SVR) or it can be a tracker mortgage linked to the Bank of England base rate.