How To Remortgage
As a former mortgage advisor, who dealt with many remortgages during my time advising clients, I am well placed to offer some general guidance on this topic.
Step 1
Check when your current discount period comes to an end, this will be stated in your illustration, mortgage offer and the paperwork sent to you by your lender when your mortgage was first taken out. It may well be stated on your annual statement - usually issued in January.
What you are checking for is that your discount period (the initial lower rate, either fixed, tracker, discount or otherwise) is not about to come to an end next week, as this will not be long enough for you to switch lenders. A good rule of thumb to use is to give yourself three months to remortgage, so if your discount period ends 30th April, it’s a good time to start the remortgage process end of January / beginning of February.
Step 2
Find out what your property is worth (www.hometrack.co.uk is a good start) and then compare against what you intend to borrow against it. Currently (Jan 2009) property prices are falling, so you could be in for a nasty surprise - your property could be worth less than your mortgage, in which case you are in negative equity and therefore will not be able to remortgage.
If you are in positive equity, then you will need to workout what loan to value your mortgage will be against the value of your property. To do this, divide your total mortgage outstanding against the value of your property, for example:
£80,000 (total mortgage outstanding) / £100,000 (current property value) x 100 = 80% loan to value
Once you know your loan to value (sometime referred to as LTV ), you will be able to search more accurately for products that will be available to you.
Step 3
You can use various websites to search for the best deals online, however, be wary as some of these are not independent, and only recommend mortgages from a tied panel. Although you may not have to pay a fee to use these services, it can be far more costly scrimping on advice in the long run if you end up paying over the odds on your interest payments. My advice would be to seek a trusted mortgage broker and get them to help you with the remortgage process.
To get good advice, make sure your broker is independent, he/she is obliged to disclose this to you on your first meeting or contact (if by telephone). My recommendation would be to use a fee based broker who is willing to refund any commission they receive from advising and arranging the mortgage to you (usually this is done as an offset against the fees they charge). Don’t think that you have to pay excessive fees, 0.5% is about the max you should be paying, but if possible, find a broker that charges a flat fee for the deal - why should they earn more money just because you are borrowing more money, there’s no extra work involved.
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