Remortgaging is a change of mortgage deal on your property. This could mean moving to a different lender or switching deals with your existing lender. Before remortgaging it is important to consider the following points as this will affect what deal will be best for you:
- Why do you want to remortgage? Is this to save money on your monthly payments, to pay off the loan sooner, to consolidate existing debts or perhaps to release equity in the property.
- Do you want the certainty of fixed monthly payments or would you prefer a variable rate deal
- Flexibility – do you want the ability to make overpayments or to move the mortgage to a new property if you move? Do you want to consider special features on the mortgage such as an offset mortgage that allows you to reduce the interest using your savings but reseving the ability to dip back into those savings if needed.
- Do you want a repayment or interest only deal? Although interest only deals will usually have smaller monthly payments as you are only paying off the interest, you will need a repayment plan as to how you intend to pay off the capital of the mortgage at the end of the term. A common example of this is to sell the property but this is usually used for buy to let properties rather than main residences.
All of the above will influence which product will be best suited to you. The deal with the lowest monthly payments may not be the best fit for you depending on your circumstances and goals. It’s therefore important to consider the bigger picture.
There are some steps that you can take to improve your chances of getting the best remortgage deals:
Compare deals from different lenders – don’t just go with your current lender and the deal they offer you. Use online calculators and comparison sites to see what rates are potentially available. You could also consider using a mortgage adviser or mortgage broker. They will have access to a range of mortgage products from different lenders and will be able to compare these for you. Ensure they are qualified, authorised and regulated by the Financial Conduct Authority and ask what they charge for their services. Some do offer this free of charge but take a fee from the lenders instead.
Reduce your loan to value ratio – each mortgage product has a limit on how much you can borrow in comparison to the current value of your property. This is represented as a percentage and called ‘loan to value’ or ‘LTV’. The lower your LTV, the more deals that are likely to be available to you and you are more likely to obtain
Improve your credit rating – having a good credit score will enable you to access the best advertised rates from lenders.
Consider the fees – administration fees, legal fees and valuation fees on a mortgage deal could end up offsetting a low interest rate so the deal may not be as good as it first appears.
