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Things to consider when remortgaging
Whether you're remortgaging because your current interest rate deal is ending or you just want to see if you can reduce your monthly repayments, there are a few things to consider before you start.
Early repayment charges
Always check if these apply and at what rate, as they can be quite substantial. Having said that, even if an early repayment charge does apply, you could still end up being better off if your new interest rate is sufficiently lower, for example.
Interest rates
Check to see what your new lender's standard variable rate (SVR) is. When your new set interest period comes to an end, you will normally be put automatically onto the lender's SVR which may be higher or lower than, for instance, the fixed rate you have been paying for years. So watch out for this and make sure you can cope with any changes to your monthly repayments.
Fees
When remortgaging your current lender may recoup some of its costs by charging valuation and legal fees. They may also charge an arrangement fee which can vary from hundreds of pounds to thousands. Most lenders will allow you to add these fees to your mortgage debt but check the interest rate that will be applied. For instance, if you have a fixed rate mortgage, you may end up paying a higher SVR on the fees.
Understanding
There are hundreds of different mortgages around. Make sure your new or existing lender fully explains the pros and cons of your new mortgage in a way you understand. An independent financial advisor could help if you feel a little overwhelmed.
Changes
You might take the opportunity when remortgaging to make some changes, for example borrow more money or increase the term of your mortgage.
Make sure you fully understand the implications of any changes you make. Increasing the term of your mortgage may lower your monthly repayments but will result in you paying back more money in the long run.
Don't be put off
Don't feel pressured to sign up with your existing mortgage lender - see what's out there! Although it might seem like a long haul, remortgaging can help you make monthly savings.
Source: Time For Money