Common misconceptions: remortgaging
Warning: THE MORTGAGED PROPERTY (WHICH MAY BE YOUR HOME) MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
You may want to remortgage for a number of reasons. Perhaps your fixed term is almost up, you’re looking to move house or your current mortgage just isn’t a good fit for you anymore. But remortgaging can be confusing and there are many misconceptions about it. We’re here to keep things simple and tackle some of those questions you might have.
It won’t make much difference to me if I remortgage or not
When you first take out a mortgage you'll most likely be on an introductory deal. This can come in the form of a lower fixed rate, a discounted rate or a low tracker rate for the first few years. These deals normally last for about 2 to 5 years.
When the deal comes to an end, if you do nothing you will usually be moved on to your lender's standard variable rate (SVR), which will most likely be higher than the rates available through transferring to a different product or remortgaging. If you don't want to move to the SVR you can look to transfer to a new mortgage product with your existing provider or switch to a new provider. Whatever you decide to do, be sure to do plenty of research first.
I shouldn’t bother remortgaging until my fixed rate deal is up
You might believe that you are well and truly locked into your current mortgage deal and moving would cost a fortune. if you end your mortgage term early, it's true, you’ll most likely be faced with early repayment charges which can be 2-5% of your outstanding loan. In addition there may be a mortgage exit fee which you’d incur for repaying a mortgage.
However don’t be completely put off. The savings you could make in the long run might be worth the fees if you switch. It’s all about doing your research and the maths to determine if the pros outweigh the cons. Here are a few things to consider: Would there be a charge for ending your deal early and how much would you pay? If there are charges, what date do they apply until? When you have this information you’ll be able to decide whether it’s worth taking the charge hit. If it isn’t you’ll at least know the date for when you can consider making the switch.
Different lenders will have different charges and requirements, you should review your own mortgage documents or contact your lender for details specific to your mortgage.
I could be paying off more but I can’t make overpayments
Circumstances change all the time but can your mortgage adapt to reflect this? You may be in a position where you can afford to pay off more of your mortgage each month. Perhaps you’ve inherited money or had a pay rise. You want to put this extra money towards your mortgage, but your existing deal won’t allow you to overpay or will only accept small overpayments.
Remortgaging might allow you to reduce the size of your loan and potentially get a lower rate. But as with the previous point you should look out for those early repayment charges and exit fees. Again do your sums and work out which option is best for you.
The early repayment charge is too much, I’m stuck
You're considering remortgaging and have done your calculations but can’t justify the early repayment charges. Don't let this stop you doing the research and arming yourself with as much information as possible. That way, when the time comes you'll be ready to make that switch.
In the meantime you could ask your current lender about switching to another of their deals. You may be able to move on to a better deal.
I’ll need to pay for a solicitor to remortgage
To remove the original lender’s interest from a property and to register a new lender, legal work will be required. On the plus side, many remortgage deals include free legal services for completing the remortgage legal work. But it’s worth noting that the lender will be using a solicitor of their choice so you won’t have a say in this. Check with the lender to find out what legal fees they charge for remortgages (if they do).
If you need to add or remove someone from your mortgage at the same time as you remortgage you will need to tell your solicitor about this. The free legal services provided by your new lender usually won’t include this so you will need to speak separately to your own solicitor. If you don’t flag this early on in the process, it could cause delays when you’re ready to complete.
I won’t need a credit check as I already have a mortgage
Even though you already have a mortgage and presumably keep up with your mortgage repayments it’s important to make sure the rest of your credit file is in order as this could have an impact on you when you’re ready to remortgage. Put a note in your calendar 2 months before you plan to remortgage to check your credit score. Give yourself time to rectify anything that could be flagged up.
Here are some things you should look out for:
- Make sure all your credit accounts and repayments are correctly listed
- Ensure that you (and anyone you're applying with) are on the electoral roll
- Explain any defaults or other black marks on your file
- If someone else’s financial record is linked with yours, ask for a notice of disassociation if it’s no longer a current link
Giving yourself plenty of time to check and organise your credit will put you in a better position when you’re ready to make that switch.
My rate is great, I don’t need to remortgage
So you’ve got the best deal you could possibly hope for and wouldn’t dream of switching but don’t become too complacent. Always try to keep your eye on the ball as your ‘perfect’ deal might not be so rosy a few months down the line. Try to work out the ideal rate you would need for a switch to be worth your while. And don't forget to factor in early repayment charges and potential exit fees. Speak to your lender to find out more about the charges and fees that could affect you.
This guide is intended as a summary only and does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide. We recommend that you seek independent legal advice and/or financial advice if you have any questions or queries.