MORTGAGE HELP DESK UK

Why and When should I Consider a Remortgages ?

Why and When should I Consider a Remortgages ?

Why and When should I Consider a Remortgages ?

Swapping mortgages simply involves changing from one mortgage to another. You do not necessarily have to swap from you current mortgage lender - if your current mortgage lender can offer you a better deal than what is available elsewhere, you should stick with them, and swap mortgage to your mortgage lenders better mortgage deal.

There are four main reasons why you might choose to swap mortgages. These are,

1. To benefit from a lower interest rate for your mortgage.
2. To swap mortgage from a variable interest rate mortgage to a fixed rate mortgage or a capped rate mortgage if you want certainty of how much you will be paying each month.
3. To release equity in your house
4. To swap mortgage plan to a more flexible mortgage if you want to be able to alter your pattern of your mortgage payments.

If you feel that you are paying a higher interest rate on you mortgage compared with what's available on the current mortgage market, then you should investigated whether it could be of benefit to swap your current mortgage. You may be able to save money, if your current mortgage has come to an end of a special deal (for example a Fixed Rate Period or a Discounted Rate Period) and you are now paying your mortgage lender's standard variable rate.

The reason for this being that there should be plenty of deals on the market that could be a better option and that may save you money than you are currently spending on your repayments. Check your current mortgage documents or ask your mortgage lender for clarity if you are in any doubt whether your mortgage has a penalty if you switch.

Swapping from a variable rate mortgage if you have got a variable rate mortgage (where your interest can fluctuate up or down), you might want to consider moving to a fixed rate mortgage or a capped rate mortgage deal.Such mortgage deals offer you the security of knowing what your next mortgage repayment will be for a set period of time.

If the value of your home has gone up significantly since you bought it, then it is possible that you could have equity in your house. This means you could swap mortgages if you find a better deal and borrow an additional amount at your same time. You must remember there will be a limit on how much your mortgage lender will lend to you based on your income and also a maximum loan-to-value (LTV). Most mortgage lenders will lend only up to 95% of your home’s value (a 95% LTV). If you manage to get a lower interest rate and are not borrowing much more, you may find that your savings in interest cancel out your cost of your extra borrowing. If not, it's important to make sure on affordability to borrow your required extra cash amount. Don't forget that, if you have got an interest-only mortgage, you now need to increase your payments to your investment to cover the extra borrowed amounts.

If you want a more flexible mortgage, especially if your income was not as secure as it was when you took out your original mortgage. A Flexible Mortgage gives you greater scope to increase payments when you can afford to and may let you reduce or miss payments for a while. Don't just swap to the cheapest deal that you see. Think first about what type of deal would best suit your circumstances. Think also about any special features you might be interested in, such as flexibility.

Portability, mortgages whether it be a repayment mortgage or an interest-only mortgage. But you can change your mortgage repayment method when switching. For example, some people who have endowment mortgages with a shortfall take the opportunity to swap their mortgage to a repayment mortgage. It's important that you seek independent advice if you plan to do this. Depending on your current mortgage, your mortgage lender may charge you for swapping. Ask your mortgage lender for a redemption statement. This will tell you how much you still owe on your existing mortgage and what your mortgage swapping charges will be.

The costs that you may come across are:

Valuation fee - Your new mortgage lender needs to check that your home is good security for your mortgage amount. That means carrying out a valuation to make sure it's worth at least as much as your mortgage. Having said that, there are quite a lot of re-mortgage deals which will refund your valuation fee as an incentive for you to swap mortgages.

Arrangement Fees - Most fixed rate mortgage and capped rate mortgage deals have a booking and/or arrangement fee. These can vary from mortgage deal to mortgage deal.Some mortgage deals now charge a percentage of your mortgage- for example 1-1.5% of the total mortgage value.

Higher Lending Charge - If the amount you wish to borrow is more than 75 % of your homes value, you may have to pay a Higher Lending Charge (HLC)

Legal fees - You who will need to appoint a solicitor or licensed conveyancer to handle your mortgage swap. This person will also usually act on behalf of your mortgage lender to check that you have a title to your house and there's no reason why your mortgage lenders shouldn't lend on your house. This involves the solicitor carrying out searches such as the local authority search.

You who will be responsible for, paying all accumulated legal fees, including the cost of your searches and land registry fees. But some deals will offer a refund of legal fees as an incentive to swap mortgage, provided that your mortgage swap is a straightforward one. In order to get a full refund, you might have to agree to use one of your solicitors on your lender's panel.

Before deciding whether it's worth swapping mortgage, you need to get all your information to hand e.g. your current monthly mortgage payment, your costs of swapping mortgage from your existing mortgage lender. It's also very important that you remember that mortgage deals with the biggest savings might not necessarily be suitable for you (for example, they may have a long early repayment charge period).

You should seek independent mortgage advice before swapping mortgage to ensure that you swap mortgage to a mortgage deal that is suitable for your circumstances. Don't just focus on the savings you can make. Make sure you take into account the penalties that any new mortgage deal you are considering attracts.

The cheapest mortgage deals often have the highest and longest lasting penalties. You might decide that it's better to make smaller savings but what happens to the flexibility to swap mortgage again if you want to.

Make sure you choose a term of the new mortgage according to how long you have already had your current mortgage. So, if it has been five years into a 25-year mortgage, take your new mortgage over a period of 20 years.

If you are borrowing more on a new mortgage, you may be tempted to increase your term in order to keep your mortgage repayments manageable but you should think carefully before doing this and seek advice.

Check that you won't lose any valuable benefits, for example with a mortgage dating from before October 1995, the benefit you have is that if you lose your job, you may be eligible for help with your interest payments from your Department for Work and Pensions (DWP). If you swap you mortgage, the post-1995 rules apply – thus you wouldn't be eligible for DSS help towards your interest payments until you have been out of work for at least nine months.

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