In the same way as consumers treat their banks, they tend to stay with their mortgage provider during the length of their loan. But in an age when we routinely switch our power and insurance providers, this may not be the best way forward. Here at Bright Loans, we can help you find the right product to suit your needs, and help you through the process of re-mortgaging your property.
So, let’s take a look at why you might want to consider re-mortgaging, and why you should compare the different products on the market.
You might be surprised to discover that almost a third of mortgages in the UK are actually re-mortgages. The loan is taken out to either replace an existing mortgage, or to take out a loan secured against the property which is already owned. Even in times of low interest rates, research suggests that borrowers can be overpaying for their mortgage. A survey by the consumer organisation Which? revealed that around 25% of those surveyed were not on the best product available to them from their lender and were paying the standard variable rate (SVR).
The result was that some borrowers were over-paying more than £4,000 per year for a mortgage on an average priced home. In London, the amount of the overspend was almost double that. Worryingly, most borrowers who had been with the same company for five years or more felt that it was not worth the hassle of looking for a re-mortgage deal. At Bright Loans we can provide a wealth of information to help with the process.
Once you have decided to look for a re-mortgage deal, you need to understand the process. You are not limited to taking out a like-for-like mortgage; this is important since you may not currently have the arrangement which is best for you. Two key things to consider are whether you want a repayment or interest-only mortgage, and a fixed or variable rate deal.
Once you have decided upon these two issues, you can begin to look for the best rates, but remember there are a plethora of providers out there. Also, the size of any deposit you may be able to afford and the equity in your home will influence those rates. Here at Bright Loans, we can provide detailed information to help you to reach the correct decision as to the kind of mortgage which is best for your circumstances and make the comparisons for you.
Many mortgages include a relatively short-fixed period, on a tracker or fixed rate. When that period ends you will be rolled over onto the lender’s SVR, usually at a higher rate and at a higher monthly cost. So, you need to check your existing deal, the expiry date, and around three months before it ends, begin to look for alternatives.
As we mentioned above one of the most common drivers is because your current deal is about to end, and you do not want to move directly onto the lender’s SVR. Secondly, you may simply want a better rate. You may have to pay some fees when you re-mortgage, but check the figures and savings and it could still be worthwhile.
You may be tied into set repayments under your current deal, but your circumstances may have changed and you may wish to reduce the amount of the loan or change repayments. In many cases, your existing lender will not allow this and so a re-mortgage may be the only option.
The value of your property may have risen significantly over the period of the current mortgage, and this may mean you qualify for a deal on a lower loan-to-value with reduced interest rates. Finally, you may simply want to borrow more capital, and re-mortgaging is the only feasible option. Lenders may want to know what the funds are to be used for, but home improvements, designed to add value to the property will often be approved.
If you have very little left on your mortgage, a re-mortgage may not be appropriate since many lenders will not offer small mortgages. Some borrowers may be tied into a large early settlement fee, and any savings you are likely to make in the future may be wiped out by this.
If the value of your property has fallen, then the reverse of the loan-to-value circumstances outlined above comes into play. This means that the value of the mortgage is a larger proportion of the value of the house. In the worst-case scenario, you could be in negative equity.
It is important to know as much about your current deal as possible. This will include the length of the agreement, the repayments schedule, the current interest rate and the balance owed. You will also need to know how much you will need to pay to exit your current deal.
It is a good idea to check how much notice your current lender will need to prepare the documentation which accompanies the redemption of the loan. With that information to hand a direct comparison can be made with any re-mortgage alternatives.
Your circumstances may have changed since you took out your current mortgage, if so you will need to carry out a new assessment.
A new lender may carry out further checks on you, so make sure you have the obvious bases covered. Check that you are still registered with your local authority on the electoral roll, and check your own credit record. The lender will run a check, and it is important that you ensure that your record is up to date. You may need to work to address any errors or issues with your credit file before making a new mortgage application.
You can be confident that at Bright Loans we will provide valuable information to help find the best deal for you. We are FCA regulated, and completely independent so why not get started with a re-mortgage comparison.