Whatever your reasons for remortgaging, you’ll want to be sure you are choosing the option that is right for you.
There is essentially no difference between a mortgage and a remortgage. They are both long-term loans which are secured against a property’s value.
Lenders tend to have different product ranges for those wanting to mortgage or remortgage.
When remortgaging, you don’t have to switch lender, although this is often the best way to reduce your mortgage cost. If you choose to stay with the same lender, this is known as a ‘product transfer’ – technically it’s not a remortgage. However, it could be that there are better deals out there if you look around.
Your own circumstances might dictate whether you are able to go to a new lender. So, your choices may be limited.
In terms of the types of mortgages you can opt for, just as with regular mortgages, there are two main types. The first is a fixed-rate mortgage which we touched on earlier. They provide a steady interest rate so you know what your monthly repayments will be. The second is a variable-rate mortgage where the interest rate can fluctuate in line with lenders’ discretion and are influenced by the current state of the economy.
Calculating potential savings
Potential savings from remortgaging can be significant. They will vary according to your financial circumstances.
As an example, if you have 20 years left on a £200,000 mortgage and you’re currently paying 4% interest, your monthly payments will be around £1,212.
Remortgaging to a product with a 2.5% interest rate means you could see your monthly payments drop to approximately £1,060, saving you £152 a month – that’s £1,826 a year.
Over the 20 years remaining on the mortgage term, this could save over £36,000 in payments.
Finding the right lender
Finding the right lender might be easier than you think.
Firstly, as outlined above, your current lender could be the one to offer you the best solution. There may be deals to be had as they aim to encourage you to stay.
If you would prefer to explore the market more, to see if there are better deals out there, it is worth speaking with a whole of market mortgage adviser – one not restricted and tied to just to a specific lender or lenders. This could save you valuable time, as well as see you reap financial rewards.
Alternatively, you can contact lenders directly.
Applying for a remortgage
To apply for a remortgage, you need to obtain a closing balance from your current lender, speak with a qualified mortgage broker, and consider all your costs. Next, complete your Agreement in Principle (AIP) and apply for the mortgage. The lender will carry out the credit check and your property will be valued. If all goes well, the lender will send you your mortgage offer letter. After checking all the details thoroughly, if you’re happy to proceed, you need to accept the offer.
Completing the remortgage process
Your solicitor or conveyancer will handle your mortgage transfer. They’ll request the funds from your new lender, clear your old mortgage and register your new mortgage at the Land Registry. Once registered, they’ll send you a copy and the original document to your lender.
Potential fees and costs
The costs you need to consider are the arrangement or product, booking or application, valuation and solicitor’s fees.
