When it comes to remortgaging your property, there are several factors to consider. Remortgaging can be a smart financial move if you’re looking to save money on interest rates, release equity, or switch to a different lender. However, it’s essential to approach the process cautiously and make informed decisions to ensure you get the best deal possible.
Your current mortgage rate is one of the first things to consider when remortgaging. Consider a remortgage if your current rate is higher than the current market rate. However, it’s essential to factor in any fees associated with remortgaging, such as early repayment charges or arrangement fees, as these can impact the overall cost of switching lenders.
01. Assessing Your Financial Situation
Before remortgaging your property, it is important to assess your financial situation. This will help you determine whether remortgaging is right for you and how much you can afford to borrow.
Calculating Your Equity
Equity is the difference between the current value of your property and the amount you owe on your mortgage.
Checking Your Credit Score
Your credit score is a number that represents your creditworthiness and is based on your credit history. Lenders use your credit score to determine your application and interest rate to offer you.
02. Understanding Mortgage Deals
Once you have compared different lenders, it’s time to look at the available mortgage deals. Many mortgage deals exist, such as fixed, variable, and tracker mortgages. Each type of mortgage deal has its advantages and disadvantages, so it’s important to understand them before making a decision.
When researching your options, ensure you understand each mortgage deal’s terms and conditions, including any early repayment charges or exit fees that may apply.
03. Understanding Remortgage Costs and Fees
Remortgaging can be a great way to save money on your mortgage payments, but it’s important to understand the costs and fees associated with the process. Here are some of the fees for remortgaging you might encounter when remortgaging your property:
Arrangement Fee
An arrangement fee is a fee the lender charges for setting up the new mortgage. This fee can vary widely, from a few hundred pounds to several thousand pounds, so it’s important to shop around for the best deal.
Valuation Fee
The lender charges a valuation fee to assess the value of your property. This fee can range from a few hundred pounds to over a thousand pounds, depending on the size and location of your property.
Early Repayment Fee
An early repayment fee is a fee the lender charges if you pay off your mortgage early. This fee can be a percentage of the outstanding balance or a fixed amount, which can be quite substantial.
Exit Fee
An exit fee is a fee the lender charges when you switch to a new mortgage provider. This fee can be a percentage of the outstanding balance or a fixed amount, which can be quite substantial.
Legal Fees
A solicitor or conveyancer charges legal fees for handling the legal aspects of remortgaging your property. These fees vary widely, from a few hundred pounds to over a thousand pounds, so shopping around for the best deal is essential.
04. Choosing the Right Mortgage
When remortgaging your property, choosing the right mortgage is crucial. There are two main types of mortgages to consider: fixed-rate mortgages and variable-rate mortgages.
Fixed-Rate Mortgages
A fixed-rate mortgage means the interest rate will remain the same for a period, usually between one and five years. This can give you stability and peace of mind, as you know how much you will pay monthly.
Variable Rate Mortgages
A variable rate mortgage means the interest rate can fluctuate over time, depending on the market. This can be beneficial if interest rates drop, as you may have a better rate than a fixed-rate mortgage.
05. Risks and Benefits of Remortgaging
Remortgaging your property can be a great way to save money on your mortgage payments, but it also comes with some risks. Here are some benefits and risks that you should consider before remortgaging your home.
Benefits of Remortgaging
- Lower Interest Rates: Remortgaging can allow you to take advantage of lower interest rates, saving you money on your monthly mortgage payments.
- Borrow More Money: If you need to carry out home improvements or have other large expenditures on the horizon, remortgaging can release the funds needed and lower the mortgage rate.
- Better Mortgage Deals: With a higher property value, you may be eligible for lower interest rates or better terms than your current mortgage deal.
Risks of Remortgaging
- Increased Monthly Payments: One of the main risks of remortgaging is that your monthly mortgage payments may increase significantly, especially if you’re borrowing a large sum of money or if interest rates rise.
- Higher Loan-to-Value Ratio: If the value of your home has decreased since you first took out your mortgage, you may end up with a higher loan-to-value (LTV) ratio, making it harder to qualify for better mortgage deals in the future.
- Credit Cards and Repossession: Remortgaging can be an excellent way to consolidate debt and pay off credit cards, but it’s important to remember that your home is at risk if you can’t keep up with your mortgage payments. If you’re struggling to pay off your debts, it may be better to seek other solutions before remortgaging your home.
Conclusion
In conclusion, remortgaging your property can be a great way to save money or finance a second property. By following the tips outlined in this article, you can get the best deal possible and avoid pitfalls. With these tips in mind, you can make an informed decision about whether or not to remortgage your property and take control of your financial future. If you are looking for a mortgage and finding it difficult to get one, Simmonds Mortgage Services is there to help you.
