So your existing mortgage product is coming to an end- so what next? Just like you would for your gas, electric and even your food shop, comparing products is just as important for your mortgage. In today’s current financial status it may not pay to switch to the variable rate that you signed up to when agreeing your existing product. By moving to a new product or even provider you could save yourself hundreds of pounds a month. If you used an adviser the first time around or for your last few remortgages, it’s never been easier to do the work yourself, and save yourself some precious pounds in the process here too; to better understand the process and the products available, we talk to Money for some advice and guidance to help make remortgaging a doddle.
If you’re thinking of re-mortgaging, always start by doing your own research. Find what you think might be right for you and then you can always seek the guidance of an expert for a second opinion if you need reassurance.
If you’re the kind of person who compares the price of electrical goods on lots of different websites before you order, you can use the same skills to save money on your mortgage. You don’t need an expert to make comparisons on your behalf.
To make sure you’re getting the best rate you need to start looking at least 14 weeks before you want the remortgage completed. Remortgaging can take up to 8 weeks and you’ll need time to do your research and get your paperwork together.
You need to convince the mortgage lender you are able to pay back your mortgage and one of the ways they’ll check this is by looking at your credit report. Make sure you check it well in advance of applying for your new mortgage deal, and inform the credit referencing agency if there is any incorrect information on your report.
Before you start comparing rates you need to look up how much your property is worth. It needs to be realistic because when you apply for a mortgage the lender may send out a surveyor to confirm the figure. Use sites like Zoopla to look up how much similar sized neighbouring properties are worth.
Unfortunately remortgaging comes with the same amount of paperwork you had when you applied for your last one. You’ve got to produce it all again. Many lenders won’t take printed online statements so you may have to get your bank to send you original copies. Your lender may want to see any of the following;
- Your last three months’ bank statements
- Your last three months’ pay slips
- If self-employed: your last three years’ accounts/tax returns
- Proof of bonuses/commission
- Your latest P60 tax form (showing income and tax paid from each tax year)
- ID documents (usually a passport)
- Proof of address (eg, utility bills or credit card bills)
Which type of mortgage to go for is the really big choice. A fixed-rate mortgage means the lender agrees to give you a short-term set rate. Regardless of what happens to interest rates elsewhere your repayments will stay the same.
The cons of a fixed rate mortgage mean if interest rates fall you won’t see your repayments drop and if you want to get out early you’ll usually pay high fees.
A variable mortgage means your mortgage rate can move up and down to mirror the the Bank of England base rate. Interest rates tend to go up to discourage spending and in downturns interest rates are cut to encourage spending.
Tracker mortgages are a popular type of variable rate mortgage which track a fixed economic indicator – usually the base rate the bank of England’s official borrowing rate. Trackers are popular in times of low or falling interest rates.
A fixed rate mortgage is an insurance policy against hikes but that peace of mind will cost you. Your initial rate may be higher than the cheapest variable rate deals.
If you’re working to a tight budget a fixed rate mortgage will give you peace of mind that your repayments won’t go up but if you’re more financially comfortable a variable mortgage could be a cheaper option for you.