Your mortgage is one of the longest financial relationships you will ever have, but it's not set in stone. Here are three things you need to know before remortgaging.
There can be many reasons for remortgaging. You may think that a new kitchen would enhance not only your cooking but the value of your home. Your family may be at a stage where a loft conversion or an extension would give everyone some breathing space. Or you may feel that your mortgage isn’t giving you the best deal.
This is a situation where careful homework - and often professional advice – is essential.
We’ve put together a few pointers so that you know what to consider before you decide to shake up your existing arrangement.
Know what you’re after
First, decide what you’re looking for from a new mortgage. Would you like to switch to a fixed-rate deal? Are you keen to borrow more to finance an extension or a new kitchen? Or do you want to pay off some, or all, of your mortgage debt early? There will be a cost attached to many of these, but it may be outweighed by the benefits.
Ask your existing lender
Once you’ve made the decision to change or re-size your mortgage, ask your existing lender first. This may well work out cheaper, as there’ll often be a fee for switching to another provider’s mortgage. You’ll be more likely to want to stay put, of course, if you’re happy with the service you’re currently getting and the way you’re being treated. A mortgage is a long-term financial relationship and there is more than money involved.
When to switch
Although it may make long-term sense to remortgage, one important consideration is – can you afford to do it now? Remortgaging can cost thousands and although a new lender will often offer to cover the previous lender’s fee, you will still have to pay a solicitor conveyancing fees for the transaction, and if you use a mortgage broker, they’ll demand a slice as well. Using a broker often makes good sense as they are experts in the mortgage market and may have access to deals that are not available from comparison sites.
Before you spend any money on advice, it pays to do a quick online calculation of the amount you’ll save if you remortgage – which you can then weigh against the cost of remortgaging.
One very good reason for switching to a new mortgage is to reflect an increase in the value of your property – the more equity you have, the lower the ‘loan to value’ and the greater the choice of products available.
There are many situations where moving or enlarging your mortgage – or paying it off early – may make good financial sense. However, it’s important to do your research and get a clear idea of the costs as well as the benefits.