5 Tips to Get the Best Remortgage Deal
Switching your mortgage deal can offer you several favourable benefits. It could save you thousands, reduce your monthly payments and cut your total loan amount! However, it only makes sense to switch in certain circumstances – for example at the end of your initial rate.
Below we have listed five useful tips worth considering when looking to remortgage.
1. Don’t leave it to last minute!
Start looking to remortgage your home approximately three or more months before the end of your initial term. This will give you plenty of time to explore your options! If you leave it too late you will end up paying your lenders Standard Variable Rate (SVR) which could see your mortgage repayments increase by £500–£1,400 PA.
For example, switching from a lender’s SVR of 4.49% to an initial rate of 1.99% could save the average homeowner £1,824 per year during the new initial period (based on a mortgage amount of £127,000 repayable over 25 years).
2. Price Compare
Customers are able to enjoy attractive mortgage deals as a result of high competition in the mortgage marketplace. Therefore, you should consider what benefits your existing lender offers you in order to shop around and find a better deal. However, be warned! You should look at the overall cost of the deal over two years and not the interest rate.
To ensure you understand your options fully, speak to our mortgage adviser.
Speaking to a mortgage adviser at Financial Foresight NI ensures you consider the best remortgage deals available and, most importantly, which one is most suitable for your circumstances.
3. Reduce your mortgage amount
Remortgage rates offered by lenders tend to decrease as your mortgage becomes a smaller percentage of the value of your home. This is known as the ‘loan–to–value’ ratio.
For example, a lender will generally offer a lower interest rate on a mortgage worth 60% of the value of a home compared to a mortgage worth 90% of the value of a home.
If the value of your home has gone up since you took out your initial mortgage, you may find that the amount you own (called equity) is higher.
Other ways of reducing the mortgage amount include:
· Overpaying your mortgage each month if allowed
· Paying off a portion of the mortgage in a lump sum at the time you remortgage
4. Improve Your Credit Score
Lenders will look at your credit score to assess your ability to honour financial commitments. So having a good score will improve your chances of getting a mortgage.
This may have been carried out when you first applied for a mortgage but lenders will most likely check your files again to investigate your finances.
It’s important to check your credit score several months before applying for a remortgage deal. This will give you plenty of time to check and address any errors.
A few good practice things you can do to improve your credit score are:
· Close any bank accounts you no longer use
· Avoiding any credit card or insurance applications in the months leading up to remortgaging
· Use and paying off a credit card to build a credit history
· Ensure you’re on the electoral roll
5. Overall Cost
The price of a mortgage is made up of several components. While it’s easy to think that getting a better rate will result in lower repayments, this isn’t always the case.
Other costs include:
· Arrangement fee: This is the fee lenders charge to cover admin costs. On average this will be around £1,000, although many will be zero.
· Booking fee: Some lenders charge a fee to guarantee that they’ll honour the rate offered, and is usually around £100.
· Transfer fee: This covers the cost of transferring money to your solicitor and roughly costs £50.
· Early Repayment Charge: Some lenders charge a fee if you repay your mortgage early. This is generally a percentage ranging from 0–5% of the outstanding mortgage balance.
· Redemption fee: The lender may charge a fee for closing your account if you were to remortgage at a later date. This can be as much as £200.
· Legal fee: This fee covers conveyancing costs and can be around £600, but could be more depending on the value of the property. Many lenders now offer free legals, so remember to ask your adviser.
· Valuation fee: Charging a fee for valuing your home is common. Expect to pay around £300 but it could be higher. Ask you adviser as some lenders now offer free surveys.
· Standard Variable Rate (SVR): Each lender sets its own SVR. It’s important to bear this rate in mind should you be unable to remortgage at a later date for any reason.
Seek Advice
Speaking to a mortgage broker will give you a better understanding of the overall cost of your mortgage. Chat to our financial experts today to ensure you don’t receive any nasty surprises.
Always bear in mind that your home may be repossessed if you don’t keep up repayments on your mortgage.
