Re-Mortgage - Independent Mortgage Advice

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In today’s competitive market, many borrowers choose to switch their mortgage every few years in order to take advantage of the new rates on offer. Those that remain on the same deal for the full term of their loan could lose out on a range of potential benefits, not least the opportunity to reduce the total amount paid back, which could be a significant margin in some cases.

In simple terms, a Re-mortgage involves switching your current mortgage to a new deal, arranged either with your existing lender or with a new lender. As a current homeowner you may want to consider taking this step for a number of reasons, such as:

To save money

If you’re paying your lender’s Standard Variable Rate (SVR), it’s highly likely that your existing lender will offer a better rate and greater flexibility on other available products. This could allow you to save money on your monthly repayments, or to repay your mortgage sooner. And if your current lender doesn’t offer better rates or greater flexibility on its other products, you may want to consider switching to another lender, even if doing so would trigger early repayment charges payable to your existing lender, as this could still mean a net saving to you.

To raise money

Higher income or a rise in your property’s value means you could increase your mortgage to help pay for major outgoings such as a wedding or your child’s university costs, rather than borrowing separately, and in some cases more expensively, for the outgoing itself.

To avoid moving home

It can be cheaper and more convenient to adapt or add an extension to your existing home, paid for by re-mortgage or a further advance, than to move home.

To consolidate your debts

Re-mortgaging can allow you to release some of the equity you hold in your home and consolidate other debts, such as a car loan or credit cards, which can attract higher rates of interest than that of your mortgage.

What steps are involved in re-mortgaging?

Re-mortgaging is much simpler than buying a new home because the deeds of the property are already registered in your name. If you choose to change to a different deal with your existing lender, the process is even simpler.

And if you do choose to switch to a new lender, only a few steps are involved. If you choose to re-mortgage with Aspire IFA Ltd, even these few steps involve minimal hassle, since we help manage the process by liasing with lenders, valuers and solicitors on your behalf.

The lender will require a valuation to ensure the value of your property is sufficient for them to lend on. Property prices can fluctuate over a short space of time so that, even if you’re re-mortgaging a year after purchase, you could still see a change in your home’s value.

You’ll be required to make an application to the lender in the same way as when buying a property. The application has to be underwritten by the lender, who will require evidence that the loan to date has been maintained. They’ll then issue you with an offer.

Conveyancing work will need to be carried out, and many lenders will only instruct a firm of solicitors with two or more partners. During the conveyancing process, local searches will be conducted and a report and title will be sent to the new lender.

Finally, the solicitor will ensure your previous lender is repaid when the new lender releases the new mortgage funds. If you’re borrowing additional funds, the solicitor will release these to you on, or shortly after, completion.

What are the costs?

Re-mortgaging can involve less cost than those incurred when buying a property, since in most cases the following charges either won’t apply or will be lower than when you first purchased your mortgage, including:

· Stamp duty - you won't be liable for this at all when re-mortgaging

· Legal fees - solicitor's costs could be lower than when purchasing the property, since the legal process is less complex for re-mortgaging than purchasing

· Homebuyer’s report or survey – if you’ve undertaken a homebuyer’s report or full structural survey when purchasing the property, you’re unlikely to need to repeat this exercise when re-mortgaging

· other costs – other costs will apply (as below) but on some re-mortgage deals the new lender will even meet some or all of these.

When considering whether to switch deals, you’ll need to bear in mind any early repayment charges that may apply on your existing deal, and the extent to which (if at all) these may reduce the potential savings to be gained by re-mortgaging.

Many of the costs of re-mortgaging are similar to those incurred when purchasing a property. These may include:

· early repayment charges (applicable in some cases)

· lender's arrangement fees

· booking and broker fees

· valuation fees

· legal fees

· mortgage indemnity (in some cases)

· discharge fees from your old lender (often called a 'sealing fee').

Who should not re-mortgage?

Many borrowers stand a good chance of saving money through re-mortgaging. But there remain some cases where re-mortgaging is not a realistic option.

· Where you have Early Redemption Penalties

If you have recently taken out a fixed-rate or discounted loan, you may find that early redemption penalties make it very expensive for you to take your loan elsewhere in its first few years. These penalties can stay in force long after the original fixed-rate or discount has run out.

· If you have a very small loan. Many lenders accept re-mortgage business only if the loan required is above a minimum level of about £25,000. Fees may also be a problem with very small re-mortgage loans, as these may outweigh the small saving on offer.

· If your employment status has changed recently

Lenders need to feel sure you will be able to repay the loan you take on, so they need to know your likely future income. If you have recently changed your work status from employee to self-employed, but have not yet had time to build up a reasonable track record for your business, you may find it difficult to get a good re-mortgage deal.

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