Why remortgage?

• If your current deal is at an end and you want a new mortgage with a cheaper rate.
• If your loan to value ratio has gone down because of an increase in the value of your property, thereby increasing your eligibility for a lower rate mortgage.
• If you are concerned that increases in the interest base rate will affect the amount that you pay on your monthly mortgage bill.
• If you want to switch from a standard variable rate to a fixed or capped rate in order to standardise future payments.
• If you want to pay off or reduce a mortgage at a quicker rate than your current deal allows and pay lower rates on the remaining amount.
• If you want to borrow money against your house in order to service a debt, fund home improvements or help a child or grandchild to buy their own home.
• If you want a more flexible mortgage to suit changing personal circumstances (allowing for a different payment structure, for example, or set to run for a longer or shorter term).

When you shouldn’t remortgage

• If the early repayment charges outweigh the benefits of a lower rate.
• If your LTV has risen as a result of a decrease in the value of your home or if you have fallen into negative equity.

How much does it cost to remortgage?

Before you decide to re-mortgage it is essential that you factor in the many associated costs and fees to work out if it is worth your while to proceed. These will include:

• Early repayment charges: If you choose to leave your existing fixed rate, tracker or discounted mortgage before the end of its term, then you will usually have to pay a penalty charge to your current lender. This is often between 1% and 5% of the outstanding mortgage loan (depending on how long has elapsed on the term). Alternatively, you may be charged a percentage of the original loan amount, a percentage of the amount already paid or interest on a set number of months. Whichever it is, be sure that the benefits of your new deal are significant enough to offset any loss here.
• Exit fees: This is an administrative fee, charged by your existing lender, to close your mortgage account and pass on the title deeds to your solicitor. They tend to cost between £50 and £300.
  Remortgage fees from your new lender: There are two main types of fee associated with moving a mortgage account, although some lenders will offer them as a free incentive.
• Arrangement fees are charged to cover the cost of setting up or ‘arranging’ the new mortgage and can cost as much as £2,500 although a lot of lenders offer a no arrangement fee product.
• Booking fees of between £100-200 can also be charged to secure a mortgage rate deal.
• Legal fees: There are an assortment of legal fees to pay when you re-mortgage, although they tend to be much lower than for new buyers as there is less legal work involved. In addition, many re-mortgages now include free legal or cash back packages. These will include a VALUATION FEE of, approximately, £300-400; conveyancing fees and (possibly) brokers fees.

What should I do next?

Once you have decided to proceed with a re-mortgage, you will need to find a new deal. There are a number of packages available on the market, so you are best advised to shop around in order to find the best rates and most favourable terms. Many experts recommend that you start to look at least three to four months before you wish to complete, although it is also a good idea to approach your current lender to see if they will match terms on a chosen deal as this could potentially save you time, money and hassle. Aside from questions of affordability, you will need to consider whether you want a fixed rate, tracker, discount or offset and current account mortgage.

Any of these options will offer both pros and cons (according to circumstances), so you should consider speaking to an independent mortgage adviser like Charles Louis to help make your decision. Once you have found a new deal, you will then need to complete an application form. This will be subjected to a credit check and will usually require documented evidence of earnings. As before, an adviser would be a useful ally to have at this stage. Once the application is approved by the lender it will issue a formal mortgage offer and hand all required paperwork, including the terms and conditions, to your solicitor.