| How do you go about remortgaging? | | | | you could end up with a shortfall when it comes to |
| Remortgaging means you repay an existing mortgage | | | | repaying the loan. However, if they perform better |
| and replace it with a new one, usually with a different | | | | than expected you will have a surplus. A pension |
| lender. It is now much easier to remortgage than it | | | | scheme provides a tax-free lump sum on retirement |
| was in the past and many homeowners can benefit. | | | | which can be used to pay off a mortgage. The |
| Some lenders even have dedicated services for | | | | mortgage market is very competitive and constantly |
| remortgaging with deals on legal and arrangement | | | | changing but you are likely to have a choice of four |
| fees. The mortgage market is now huge and can | | | | types of product to pay the interest. A fixed-rate |
| appear complicated, so it may be difficult to know | | | | scheme means that your monthly payments do not |
| where to start. | | | | change over the agreed period, usually 2 to 5 years. |
| What should you consider when remortgaging? | | | | This means there is no uncertainty over your |
| Firstly think about why you want to remortgage and | | | | payments and you can work out your budget |
| workout whether the benefits will outweigh the costs. | | | | accurately each month. This is also a good option if |
| The main reason for remortgaging could be to reduce | | | | you think rates might increase but there is no benefit to |
| monthly payments by obtaining a cheaper mortgage | | | | you if rates decrease. At the end of the period there |
| deal on a lower interest rate. You may also want to | | | | will be options to transfer to another rate, for example |
| change the repayment period, perhaps to ensure you | | | | a new fixed rate scheme. A discounted mortgage will |
| have paid off the mortgage before you retire. | | | | give you a percentage reduction on the lenders |
| Alternatively you may wish to release some of the | | | | standard variable rate but only for the agreed term. If |
| equity in your property for other purposes, such as | | | | interest rates rise or fall so will your payments. A |
| home improvements. This will be possible if the market | | | | capped-rate deal means your payments will not go |
| value of your property is greater than the amount you | | | | above the set level. Your payments will rise and fall |
| owe on the mortgage. This may well be considerably | | | | with interest rates but will only increase up to this |
| cheaper than taking out a personal loan as the debt is | | | | agreed maximum. This method can also be helpful for |
| secured on your property, but you should be careful. | | | | budgeting each month. A flexible mortgage will allow |
| Remember if you have difficulties with your | | | | you to increase or decrease your payment as and |
| repayments in the future, you may have to sell your | | | | when you choose. This could be appropriate if you |
| home. The next step is to write down your monthly | | | | want to pay off the mortgage early or perhaps if you |
| payments and check your current rate. If you are on a | | | | have an inconsistent income. Some flexible features |
| traditional standard variable rate mortgage then you | | | | can also be available with the other types of |
| are likely to make considerable savings by switching to | | | | mortgage. |
| another deal. With this type of mortgage the rate | | | | Are there any extra costs? |
| changes with interest rates. You may start off with a | | | | It is very important to check the small print of any |
| different kind of mortgage such as a fixed rate, but at | | | | mortgage contract. In particular you should look out for |
| the end of the fixed period it is likely to revert to a | | | | extended redemption penalties. These may also be |
| standard variable rate unless you specify otherwise. | | | | called early repayment charges or penalties. This type |
| Some research suggests that over half of all | | | | of charge has been reintroduced by some lenders to |
| borrowers are paying more than necessary because | | | | try and stop people remortgaging too frequently in an |
| they are on a variable rate deal. If you can reduce the | | | | attempt to get the best deal. There will be |
| interest rate you are paying by one percentage point | | | | arrangement and legal fees and the cost of a survey |
| then you could save around £1,000 per year on | | | | to be added to any penalty charges. Some lenders |
| a £100,000 mortgage. However, it may be that | | | | may provide these services free of charge to tempt |
| you are locked into your current mortgage or the deal | | | | you into accepting their mortgage offer. Other extras |
| may include early repayment charges. Therefore you | | | | can include charges for telegraphic transfer of funds |
| need to check the terms and conditions of your | | | | and a sealing fee when a mortgage account is closed |
| existing loan carefully before you go any further. The | | | | and the property deeds released. If you are borrowing |
| penalties incurred may mean it is not worth switching | | | | additional money when you remortgage, check there is |
| to another lender. You should also remember that | | | | no mortgage indemnity guarantee premium |
| there will be legal and arrangement fees associated | | | | automatically included on your payments. If you cannot |
| with remortgaging, as well as the cost of a survey. | | | | keep up repayments this guarantee protects the |
| How do you get a good deal on a new mortgage? | | | | lender but not you. |
| In order to get a better deal on your mortgage you will | | | | Applying for a remortgage. |
| have to do some research. You can go direct to | | | | Once you have decided on a new mortgage provider |
| lenders for information or use a mortgage broker to | | | | the next step is to ask for a redemption statement |
| help. A broker will compare offers from different | | | | from your current lender. This will tell you how much is |
| lenders and may have access to special deals | | | | outstanding on your existing mortgage. You will then |
| unavailable elsewhere. However make sure you check | | | | need to fill in an application form from your new lender. |
| the fee for the broker's services and also do some of | | | | They will also require proof of identity and details of |
| your own research. You can simply phone providers | | | | your income including bank statements, payslips, P60 |
| or use internet sites which provide mortgage | | | | form and mortgage statements. You will have to pay |
| calculators, search and comparison services. It could | | | | between £200 and £300 for your new |
| be worth asking your existing lender if they can offer | | | | lender to carry out a valuation survey on your home. |
| you a better deal. This will cut down on costs and | | | | There are also likely to be legal costs of about |
| paperwork. | | | | £350 and an arrangement fee of around |
| What types of mortgage are available? | | | | £300. In some cases the lender may offer |
| As with any mortgage you have to decide how to | | | | special deals or exemptions on these fees. If the |
| repay the capital you borrow and how to pay the | | | | valuation survey is satisfactory then the lender will |
| interest on the loan. You can pay off the capital | | | | send you a mortgage offer of advance and work with |
| gradually in monthly instalments with a repayment | | | | your existing company to complete the remortgage. |
| mortgage, or as a lump sum at the end of the term by | | | | Your solicitor or new lender will then send you a |
| investing in an endowment policy, Individual Savings | | | | completion statement. Once you have received this |
| Account (ISA) or pension mortgage. If investments in | | | | the arrangements are complete. The whole process |
| endowments or ISAs do not perform as expected | | | | of remortgaging should take about a month. |