Your existing mortgage product is coming to an end. so what’s 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 situation, it may not be beneficial to follow the variable rate that kicks in when your current term ends. Likewise, you may not need the same product you had before. By moving to a new product and even a new 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.
Do your own research first
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.
Really look at your financial situation
As you’ll be familiar from applying for your first or with each remortgage, you need to convince the mortgage lender you are able to pay back your loan. One of the ways they’ll check this is by looking at your credit report. You can actually check this yourself through Money Saving Experts Credit Club which offers a free credit score. Make sure you check it well in advance of applying for your new mortgage deal so you can see any impact on your report and adjust if necessary, you may need to inform the credit referencing agency if there is any incorrect information on your report which may impact your chances for approval.
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 neighboring properties are worth and even an estimation of your own house value.
The information you need when remortgaging
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
- If self-employed: your last three years’ accounts/tax returns
- Your last three months’ pay slips
- 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)
The different types of mortgage
Fixed rate mortgage
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, this could be a cheaper option for you.
Looking for other financial tips? Check out our other money matters features below.