Q & A: Moving your mortgage

Many homeowners could benefit from switching mortgage provider, experts suggest. Jerome Thompson of Reef Financial Services,  explains how to go about remortgaging.

Can I save money by re-mortgaging

Yes, it is estimated that more than half of all borrowers are continuing to pay over the odds for their mortgage each month. Usually these people are paying the lender's standard variable mortgage rate. Switching to a cheaper mortgage deal is one of the easiest ways that homeowners can save money.

For example, someone with a £100,000 loan who switches from a standard variable rate deal could save about £1,000 a year for each one-percentage point reduction in their interest rate.

Re-mortgaging has become much easier in recent years. More lenders are offering specialist re-mortgages through IFA’s..

My Neighbours have told me that you can borrow more money through re-mortgaging, is this right?

Yes. Re-mortgaging is not only about saving money.

As well as reducing your monthly payments, you can also use re-mortgaging as a way of releasing some equity that has built-up in your property's value. If you are tempted to release equity, it is still important to be cautious even though rates are so low. Borrowing through your mortgage may be much cheaper than taking out a personal loan, but the debt is secured.

This means that if you can not keep up with additional payments, you could risk losing your home.

Where do I start?

The first step is to check the terms and conditions of your existing mortgage. If you need help the a Reef IFA will be happy to assist. This will tell if you are tied-in to your mortgage deal or if there are any redemption penalties - sometimes phrased as early repayment charges.

If you are locked-in, you must decide if it is worth switching to a different rate or stay put until the penalties have expired.

You may have been with your existing lender for a long time and feel a sense of loyalty towards the company.  However, most lenders do not reward this loyalty with a reduction in rates. You should therefore expect to shop around and look towards a different lender to get a better deal with your Financial Advisor.

The advantage of using a mortgage broker like Reef, is that they will look at what different lenders are offering and they often have special deals, which are not available elsewhere on the High Street.

Which deal is best for me?

You will face a choice of broadly four types of deal: fixed, capped, discounted and flexible.

Fixed-rate schemes are ideal for people who want certainty and must be able to regulate how much they will be spending each month.

The rate is usually fixed for between two and five years.

Discounted loans offer a reduction off the standard variable rate for a set period. If rates fall further, the rate that you will pay will also go down. However, when rates rise, so will your mortgage payments. A capped-rate loan will set a limit on the rate you will pay. If rates rise, your payments will not go above that level. However, if rates fall below the cap so will your repayments.

Flexible mortgages allow you to overpay and underpay when you choose and without penalty. This is ideal for people who have fluctuating incomes or who want to clear their mortgage early. An increasing number of fixed, capped and discounted deals have more flexible features as well.

How do I apply?

Obtain a 'redemption statement' from your existing lender. This will tell you how much you owe. Contact your advisor and he  or she will help you to  complete a simple application for a new lender, along with details about your income such as bank statements, payslips, a P60 form, mortgage statements and proof of identity.

Your new lender will value your home and make a formal offer. There are fees associated with this but they vary wildly. Some lenders will  charge an arrangement fee of about £300 and you will have to pay legal costs in some cases, however some lenders offer dedicated re-mortgaging services with free legal work and valuations.

How long does it take?

It should take about two weeks to a month to complete the re-mortgage. You will get a mortgage offer of advance, if the lender's surveyor is satisfied with the value and condition of your home. You new lender will liaise with your existing company.

Once you have received a completion statement from your solicitor or new lender, the process has finished.

Like more help Contact Reef on 01202 606363

 

Author: John Watkins

Many homeowners could benefit from switching mortgage provider, experts suggest. Reef Financial Services explains how to go about remortgaging.

Published on 17/4/2006.

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