Becoming a homeowner is a huge milestone in anybody’s life. From the first viewing to signing the last piece of paper, the experience can’t be described as anything short of thrilling.
But few talk about what happens years later when home-owning duties kick-in and your mortgage is coming to an end.
Well, let’s find out. Because knowing what to do, might be something that could save you (a chunk of) money.
What is remortgaging and how does it actually work?
So what does it actually mean to remortgage a house? In simple terms, remortgaging means switching your current mortgage deal to another mortgage deal. This means you can either stay with your current lender or choose a new one when the fixed term of your deal comes to an end. Often when your fixed term ends, the lender switches you to the variable interest rate which sometimes means you will end up paying more interest than you have paid up until now, so most owners try to avoid being in this situation. The question is, should you, too?How does the process work?
When hearing remortgaging, many might get put off because of the tedious process as well as the vision of more debt that it may involve. However, while it may seem as unreasonable or tedious, it may save you quite a bit of money on a monthly basis moving forward. Very often, remortgaging is a fairly straightforward process. Filling the application is simple. However, finding a better lender can be a part you want to be very diligent about. To avoid the pressure of deadlines and short timeframes before your current deal expires, it is usually advised to start looking and weighing in different options at least 6 months prior to your deal ending. This will allow you to consider all the options and choose the right one without unnecessary pressure. Keep in mind that remortgaging doesn’t necessarily mean you have to choose a new lender, you could actually stay with your existing lender switching to a new mortgage deal. So, how would that work? Let us explain… If you would decide to stay with your current lender, you could switch to a new mortgage deal which results usually in a very straightforward process. The plus is, if you are satisfied with your lender and your lender is familiar with your case, they already know everything they need to about your property which means cutting on extra processing work and therefore extra fees. However, if you decide to switch to a new lender because you are no longer satisfied with your current one, get ready for the proper due diligence and approval process. Very similar to your first mortgage application. You will need to present your case with personal information, evidence of financial capability and other supporting documents. This will involve checking your credit history before arranging the property valuation. The whole process might take up to 2 months depending on the efficiency of the lender.
So what are some advantages and disadvantages of remortgaging?
Advantages
Reducing your monthly payments One of the most obvious ones would be lowering your monthly repayments whilst not compromising on extremely high interest. Alternatively, the reason could be to pay off your mortgage sooner without involving outrageously high fees. Clear overview of your monthly costs We all have been there when each month, we have extra expenditure to cover that hasn’t been foreseen and the last thing we wish for is not knowing what our monthly mortgage payment will be calculated at the end of the month. Having a fixed-rate mortgage gives peace of mind when planning long-term, as it allows for more precise monthly expenditure planning without having to worry about fluctuating interest rates. Borrowing more funds Home renovations are attractive for every homeowner, as they promise a high return for a relatively small investment. However, even for that investment sometimes you may be short of funds and therefore remortgaging can release the investment needed for such situations.Disadvantages
Meeting tight criteria As mentioned above, you can either decide to remortgage your property with the existing or new lender. If you decide to go for a new lender chances are you will be treated equally as any other new applicant regardless of the fact, you have once already passed all mortgage checks. If during your mortgage deal you have become self-employed or your employment circumstances changed, this may cause a bit more headache during the application process as you will need to prove all the evidence and financial capability to repay the mortgage, taking into consideration new circumstances Don’t forget about the fees When remortgaging, people often forget about the legal fees that are involved in the process. This will cover valuation, arrangement or legal fees which sometimes can outweigh the savings you would be making if you switch. Therefore, before switching to a new lender, it might be worth exploring what your current lender could offer you. As he already knows and has your case file, you will not need to cover such fees during the process.
