Replacing your current mortgage with a new one – this is the concept of remortgaging. In its strictest definition, you’re supposed to change your lender when you remortgage. Today, however, some people use the term to describe a further advance or to switch to a different product with your current lender.
With the upturn in the UK’s estate market, this has gained popularity. But just like any other loan, remortgaging isn’t for everyone. It’s important that you think about why you’re going for a remortgage. You’ll have to do the math on different remortgage rates in the UK as well to ensure that you’re getting the best deal. The cheapest isn’t always the best, the same way that the most expensive deal isn’t always the perfect fit for you. The best course of action is to shop around, research, and get expert advice.
You can get help from a financial adviser. Since the Financial Services Authority became in charge of mortgages back in 2004, it has created three categories of advisers, to wit:
- Tied adviser – The adviser’s capabilities are limited within the products of the lender they’re working for.
- Multi-tied adviser – In this setup, the adviser can offer different products from multiple lenders provided that the lender is part of the circle or group he’s allowed to deal with.
- Independent financial adviser – Also known as IFAs, these people are impartial when it comes to advice and can give suggestions regardless of who the lender is.
Remortgaging, of course, has its fees. And while some lenders have “fee-free” deals, it’s still important that you know about the dues you’ll have to pay.
- Valuation fee – The lender will have to make sure that your property (which will act as security) is of adequate value. Rough estimate, this will cost around £250 plus VAT.
- Legal fees – Transferring the property to your name entails a lot of legwork and different fees as well. Ready around £300-1,000 for this one, as the rate depends on the deal’s complexity.
- Arrangement fee – Usually happens on a fixed rate mortgage, though it can apply to other types as well. Usually, it’s around £900 – but it can be adjusted to a certain percentage of the amount.
- Fee-only – Refers to the adviser’s hourly rate.
- Commission – A percentage of the loan for the adviser usually charged to you through interest rates if you haven’t given anything to the adviser upfront.
- Deeds release fee – Some lenders charge an exit fee to release the deed.
Done in the right situation at the right time, remortgaging can save a lot of money. As long as you know all the important details and you’re aware of what’s involved in a remortgaging, you’ll surely have an easier time finding the right deal for you.