Last autumn we looked at the market for those refinancing, known in the mortgage industry as 'Remortgaging'. Things have changed a little so it's worth revisiting this as we reach the halfway point in 2013.
Remortgaging generally occurs when you are approaching the end or have reached the end of a preferential mortgage deal offered by your current lender, maybe a fixed or tracker rate, to avoid slipping onto the usually more expensive 'standard variable rate (SVR)' from that lender. Sometimes you just want to get the best ongoing deal, sometimes you may wish to raise extra funds for home improvements or even consolidate debts, but here's some tips.
Look Early - don't wait until your current lender writes to you a fortnight before your payment goes up, look at your last mortgage offer or statement and diarise to start looking 3-4 months before the deal is due to end, don't worry about the new deal starting early and incurring penalties, this wont happen as there is a legal process involved if you move lenders that ensures switchover doesn't happen until your old deal ends. The application process can take 8 weeks so if you leave it, you will likely pay more on the old lenders SVR at least for a few weeks and this can be hundreds or even thousands depending on your mortgage size. If you have a good broker they will diarise for you and contact you early, it's treating customers fairly and good business for them.
Ask your existing lender - sometimes a lender may offer you a deal that is not advertised in their outlets or even via brokers, invariably these don't involve credit scores, paperwork or valuations too, but again, ask them early. This is particularly useful if your income is difficult to prove, you are self employed or you have less than perfect credit, as you may not be able to move elsewhere.
Account for Switching costs - most new lenders will cover the cost of revaluing your home and the legal costs incurred by changing the deeds at the land registry and synchronising a smooth changeover...but not all, read the small print and always (in all mortgage situations) ask for a 'KFI' or Key Features Illustration, this gives you the true cost. Also some lenders advertise terrific headline grabbing rates, several now below 2%, but beware these can carry very high booking fees, you need to weigh up the cost of paying this or adding it to the mortgage against other deals which may have lower fees, or even no fee at all. These latter deals are particularly of benefit to those who owe under £150,000.
Be realistic about your property & income - get two or three local estate agents to value your home and then knock 5% off the lowest estimate, that will give you a rough idea of what a lenders surveyor might value it at. It's important to get this right because the lender that offers the best deal at borrowing 75% of the property value, may not offer the best rates at 80% and so on. You don't want to have already paid a booking fee, had a credit score done and wasted four weeks only to find you now are not with the lender who offers you the best deal. Same goes for income, show the lender or broker proof of your income before you apply to avoid any nasty surprises weeks down the line.
Get advice - best way to save all this hassle is to employ a 'whole market' mortgage broker to do it for you, check HSBC/First Direct though as they don't use brokers. Many brokers now charge fees (some still don't) but if you are paying less than £300, it's probably well worth from what they could save you in hard cash on the deal or legwork in the process.
Dean Mason - Cemap, Cert PFS.
Practice Principal
Masons Financial Planning
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