Common misconceptions: remortgaging
The mortgaged property (which may be your home) may be repossessed if you do not keep up repayments on your mortgage
Remortgaging can be a tricky subject to get your head round, and many homeowners don't fully understand how it works.
We've busted some of the most common myths about remortgaging.
Remortgaging won't make much difference to my finances
It's actually possibly to save a lot of money by remortgaging.
When you first take out a mortgage, you'll usually be on an introductory deal. These deals tend to last 2, 5 or 10 years.
But when that deal comes to an end, you'll most likely be moved to your lender's Standard Variable Rate (SVR). This is usually much higher than the rates you could get by remortgaging to a new deal.
So do your research, speak to your lender and figure out your options.
I shouldn't remortgage until my current mortgage deal runs out
In some situations, you'll still save more money by remortgaging early, even if your current mortgage deal is still running.
Many people believe that they should wait for their current mortgage deal to end because of early repayment charges (ERCs). These are fees you pay to clear your mortgage ahead of schedule. Early repayment charges usually range between 2% and 5% of your outstanding loan.
You might also have to pay a mortgage exit fee.
But not all mortgages have an early repayment charge. And in some cases the amount you save by remortgaging will outweight the costs of paying the charges.
So before you decide to wait for your deal to end, you should check:
- Is there an early repayment charge on your mortgage?
- If so, how much is it?
- What date does it apply till?
- What's the most you could save by remortgaging?
When you know this, you can do the maths and figure out if you'd save money by remortgaging - even if you have to pay the ERC.
I'll need to pay solicitor's fees to remortgage
In some cases, you won't need to pay any solicitor's fees when you remortgage.
The legal fees charged when remortgaging are for legally removing the original lender's interest from the property and registering the new one.
Many lenders pay the remortgage fee for you, but you should always double-check this.
Credit scores don't matter when remortgaging
A bad credit score can still have a negative effect when you come to remortgage, even if you've kept up with your mortgage payments so far.
Put a note in your calendar 2 months before you plan to remortgage to check your credit score. Give yourself time to fix any problems that might be flagged up.
Look out for:
- Incorrect listings - are all credit accounts and repayments accurate?
- Your electoral roll status - your credit report will be better if you (and anyone else you're applying with) are both listed
- Black marks on your file - can you explain them?
- Other people's financial records linked to yours - you can ask for a notice of disassociation if the link between your finances is no longer relevant, and it's having a negative effect on your score.
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.