The Remortgaging Need-to-know Guide

By Author: Lucy Carter
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Remortgaging is just another term to describe the act of refinancing your current mortgage. This is generally a way to take advantage of better or more suitable deals that become available to you through your existing loan provider or one of their competitors.

It is always a good idea to keep your eye on the marketplace as there are constantly new packages being offered. A little bit of research could end up saving you a significant amount of money, allow you to conveniently consolidate your debts or free up cash when you happen to need it.

The following facts and advice will help you decide on whether a remortgage is the right step forward for you.

Do the math

When considering a refinance of your existing loan, it's crucial to carefully research and calculate your options. Firstly, ask your current lender to provide you with a 'Redemption Statement', this will let you know exactly how much you still owe them. It's always worth first finding out whether they have any new deals currently available to as loan providers may offer incentive packages to prevent you from being lured to a competitor, especially ...
... if you have a good payment history with them. Secondly, when researching different deals on offer, always use a mortgage repayments calculator to clearly tally how much your monthly repayments will be.

Know the fine print

The reason why it is vital to read the fine print of any potential remortgage offer is that some deals can look highly attractive on the surface, but can levy hidden costs that will actually outweigh their benefits. Some lenders charge hefty penalties if you decide to change to a competitor - this lack of flexibility will prevent you from taking advantage of remortgaging opportunities in the future. Other examples of hidden fees to watch out for are arrangement, legal and valuation charges. Above all, make sure your potential lender comprehensively explains all costs to your satisfaction before signing up.

Pros and cons of using a remortgage specialist

Navigating the different types of remortgage deals to find the one that suits you best can be tricky - there are cashback mortgages, trackers, flexible loans, fixed-rate and capped rate remortgages, to name a few. Bearing in mind these choices can be highly confusing, the extra cost that an experienced mortgage broker will incur could in the long run end up saving you money. This is because a reliable specialist has the experience to choose the best package for your circumstances. In certain more complex cases they are highly recommended, such as if you are looking at a remortgage for retirement fund purposes or if you've been gifted a property. In the former scenario, a broker can help you negotiate a good deal on converting some of your home equity into cash so that extra funds are released to boost your bank account when you're no longer earning a monthly salary. In the second case of a gifted property, a specialist can negotiate a loan based on the value of the property, meaning that a percentage of this asset is applied to your debt. The main things to watch out for when considering a remortgage specialist however it that they are impartial - some brokers are affiliated with a set list of insurers, so they would not be able to give you a completely objective recommendation on what will suit you best.

Basic tips on remortgaging

These are some main points to consider when deciding on a remortgage:

· SVR (Standard Variable Rate) - this is the interest rate charged by your lender on top of the fluctuating base rate set by the Bank of England when your mortgage deal expires. It's wise to opt for a remortgage deal that excludes the SVR, since if you're paying for example an extra 2% charge higher than the base rate, this can add up to a weighty extra cost. You will generally be automatically switched to the SVR once your deal expires, so if your mortgage includes this fee that would be an opportune time to remortgage.

· ARM (Adjustable Rate Mortgage) - this type of loan can be subject at times to alarming rate increases. It prompts many home owners to opt for a remortgage.

· Cashback Mortgage - this type of remortgage works by freeing cash against the equity of your home. It involves arranging for a home equity line of credit.

· Fixed Mortgage - if a low interest rate is what you're looking for, it's a good idea to choose this type of package where you will make set payments over a 15 or 30 year period.

The right remortgage deal can be an excellent financial decision. Above all, it's important to keep up to date with what's currently on offer as well as make sure your new loan will in fact suit both your needs and budget.
Sean Raston - economics student and expert in remortgage.