Monday, January 28, 2008

How To Re-mortgage

More than half all homeowners in the UK are paying too much for their mortgage according to a recent survey. So if you are struggling to keep up with mortgage payments, or just feel you are paying over the odds on your home loan, then re-mortgaging may be the answer. It can give you lower monthly payments and even save you money in the long-term so there is little to be lost from at least exploring the possibility.

In recent years banks and building societies have massively increasing mortgage fees in order to pay for headline interest rates and prevent ‘rate tarts’ flitting between providers’ introductory offers. You will need shop around and do your sums to make sure that what you gain through switching lender – lower monthly payments - is not lost through higher charges. Unless you make a substantial saving from making a move then you may well be better off waiting a couple of months to see if a better offer becomes available as interest rates fall. But once you have decided to re-mortgage, how do you go about the getting the process started?

Firstly you need to obtain a ‘redemption statement’ from your existing lender. This will tell you how much you owe, and detail any redemption penalties or early repayment charges that will be incurred if you change your deal. It is important to pay attention to this because fees can often be prohibitive and cancel out much of the benefit of a new cheaper rate.

After deciding which deal to move to, it is then time to fill out the dreaded application forms. These will ask for details about your income, and documents such as bank statements, pay slips, a P60 form, mortgage statements and proof of identity. Your new lender will also value your home which can cost between £200 and £300, and may also charge you an arrangement fee which will be at least another £200 can end up costing your more than £1,000. As you can see re-mortgaging is not cheap and these charges must all be factored in when deciding whether it is financially viable to move.

If this tips the balance between a re-mortgage being cheaper or more expensive, then it may be worth shopping around for a company who waives these fees. Some lenders offer dedicated re-mortgaging services with free legal work and valuations but these are often cancelled out by more expensive rates. If costly arrangement fees are a deal breaker though, then do not be afraid to ask about a discount. Lenders are desperate for your custom, and will often be prepared to make compromises just to get you to sign up.

Overall, the whole process of shifting provider will probably take you about a month. Once the application forms have been posted, the lender will get to work with a valuation, and if its surveyor is satisfied with the value and condition of your home it will offer you a deal. Your new lender will then liaise with your existing company and you have received a completion statement from your solicitor or new lender, as soon as the process has finished.