Remortgage advice, independence and choice for your remortgage

You may have a mortgage that no longer fits your requirements. For example you may wish to have the ability to off-set savings or make regular overpayments. Similarly your circumstances may have changed and you now require the stability of a fixed rate mortgage rather than a variable product.

Many people who had taken out an endowment mortgage in the past have been changing these mortgages to capital and interest, or making some capital payments to cover potential endowment shortfalls.

People often take the opportunity to consolidate debt whilst re-mortgaging and for some this is the primary reason. A well timed re-mortgage may allow you to nip credit problems in the bud and reduce monthly payments before you start missing them.

Raising capital by releasing the equity in your property can also prove useful in the correct circumstances. For example you may wish to pay for home improvements, release money for business purposes, or buy a place in the sun.

Probably the main reason for arranging a re-mortgage is to save money. We have an extremely active mortgage market and lenders compete with each other for your business. The majority of lenders have incentives to encourage people to move their mortgage to them ranging from ‘free fees’ to discounts in the early years. For example many people now move from one 2 year deal to the next and under the right circumstances can save significant amounts of money.

It can take up to 3 months to arrange a re-mortgage. Obviously we will make it as quick as possible but some lenders are slow, valuers can be fully booked and solicitors can sometimes appear to have two speeds (stop and reverse!). We recommend discussing your re-mortgage 3 months before you want to complete to make sure that everything is done on time.

How much will your existing lender charge you for leaving them, make sure you call your lender and check:

• Early repayment charge - this is a penalty that will usually expire after a certain period of time, make sure you don’t complete the re-mortgage before this date unless absolutely necessary.
• Deed release fee - this is a charge for releasing your deeds, lenders have been increasing these over recent years. It can range from £50 to over £300.
• Interest - some lenders may charge interest for the entire year / month and may not refund overpayments to you if you leave early.

How much will the new lender charge for arranging the mortgage, fees could include:

• Valuation fee - a fee charged for valuing the property, it is unlikely that the lender will send you a copy of the report and often the valuation is desk based or a drive by. This fee is usually not charged or paid by the lender on re-mortgages.
• Arrangement fee – it is becoming more common for lenders to charge an arrangement fee for re-mortgaging (especially if you want a fixed rate). Again deals are available without this charge.
• Booking fee – A charge from the lender for booking the product, paid in advance and often not refunded if you fail to complete the mortgage.
• Other fees – It is also possible for ‘higher lending charges’ to be charged, depending on loan to value. This can be a high amount and you need to be absolutely certain if this will be charged or not.

When looking at fees it is important to remember that even if a fee is ‘added to the loan’ you need to take it into account. In fact fees that are added will cost more over the period of the mortgage as interest will be charged on the amount.

Make sure you fully understand your new mortgage. Are you able to overpay, is the rate fixed or variable (and if variable how much could it go up if rates increase), and are you tied in? You need to pay special attention to make sure you understand whether you are ‘tied in’ after any initial deal and whether the deal is ‘stepped’ and will increase by set amounts in the future. What initially looked like a great deal may have a nasty surprise!

Do you have any other outstanding debts. In certain circumstances it is worthwhile consolidating all or some of your debts when re-mortgaging. However there are certain things you need to consider:

• Secured Loan – if you add unsecured debts such as personal loans and credit cards to your mortgage you are effectively offering your property as security against these debts. This often allows you to get a better rate but you must understand the implication of securing them against your property.
• Short term debt / long term debt – you may well reduce your monthly outgoings but changing a 2 year loan to a 25 year mortgage may well result in you paying significantly more interest over the term of the mortgage.

If you are intending to consolidate debts and reduce your monthly outgoings then it may be wise to:

• Overpay on your mortgage and therefore pay it off earlier
• Destroy your credit cards and try not to take out any more loans etc unless absolutely necessary. Borrowing to go on holiday may seem like a good idea before you go but paying it back when your tan has faded is less appealing.

When you arrange a re-mortgage solicitors need to ensure that everything is legal and above board. You may need to pay legal fees. Even if you opt for a mortgage with ‘free legals’ be aware that you may need to pay for the transfer of funds and any additional services (eg. Adding someone else to the mortgage).

Remember the ‘free legals’ companies are not charging much to the lender and therefore their service can sometimes be poor. As a rule if everything goes through smoothly then you should be fine but if any problems occur you may struggle to speak to the solicitor or have your calls returned.

You may wish to consider going for a deal where you can instruct your own solicitors and hopefully get a better standard of service. We can recommend firms who have a good relationship with ourselves and often get the lender to contribute toward the costs.

It is your responsibility to make sure the mortgage does not complete before the redemption penalty expires. We have known occasions when solicitors complete a day before the penalty expires!

There are alternatives to re-mortgaging and these should be considered if necessary. If you are possibly going to incur a large penalty for switching to another lender then it is worth considering a further advance from your current lender, or a second mortgage on the property from a different lender. If you consider these options you should ensure you are not ‘tied in’ for longer than the main mortgage so that you can re-mortgage without penalties when the penalties expire on your current deal.

The eventual idea is to end up without a mortgage and to own your home outright. At some stage your mortgage will hopefully be small enough so that the effect of a lower interest rate will not make as significant a difference. At this stage it is worth considering moving to a flexible mortgage that gives you a lower long term rate. For example if it will cost £500 to move the mortgage and you will only save £20 a month for 2 years before the rate goes up again you would be better off going for a long term rate saving say £10 per month but where there is no need to change it again.

At Simplicity we are trying to present a new approach to mortgage and financial services. We will ensure you get the very best deal and include all the ‘hidden costs’ when helping you decide on the right mortgage. We will help you make sure that your mortgage fits your current situation and as far as possible your future. We have access to over 60 lenders and 4,000 plus mortgage products.