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Remortgaging
Moving your
mortgage from one lender to another is known as remortgaging. It’s a good
way to escape high variable or fixed interest rates and take advantage of some
of the current fixed-rate or discount mortgages, which have much lower rates. It
is also a way to raise funds for an expensive purchase. If you have owned your
property for a few years it could be worth much more than your outstanding debt.
By taking out a new, larger mortgage you can release money to spend as you
choose.
Applying for a new mortgage on your existing property is much the same as
applying for a loan to fund a house purchase. You need to supply information
about your income and outgoings, and the property on which the mortgage will be
secured. The lender will want to undertake a valuation – although, in some
cases, it will do this from outside the property.
On the legal side, the lender will want a conveyancer to undertake a local
authority search and a search to prove you own the title to the property. As
there is no sale involved, there are no contracts to prepare, so the process
should cost less than that surrounding a house purchase.
To attract customers, many lenders offer a remortgage package. This usually
offers free legal work or a contribution towards legal fees, a free valuation
and a reduced administration fee. Where no remortgage package is available, you
need to bear in mind that the costs associated will make a dent in your
potential savings.
For a successful remortgage,
follow these steps:
1. Write to your existing lender and ask for a redemption statement. This will
show how much you have to repay and any penalties or fees to be charged for
redeeming your mortgage.
2. Calculate what the legal fees involved will be. These will vary according to
the value of the property and the solicitor used.
3. Look at the new mortgage, including the small print, and ask for a written
statement of what your new repayments will be, showing any discounts and all the
costs that will be incurred such as the MIG and any arrangement fees.
4. Work out how much you will save each month by taking the repayment for the
new loan away from the old repayment – don’t forget to take the standard
variable rate (SVR) that the new loan will revert to into consideration as well,
particularly if the discounted or fixed rate is only for a brief period of time.
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