In the old days, remortgages were the last resort of the financially desperate, commonly associated with bankruptcy. Nowadays, it simply means that you are switching your mortgage onto a new deal and probably a new mortgage lender.
Today, almost half of all mortgage borrowers are paying the standard variable rate of their lender, which will never be their best deal. Yet, only 22% of customers re-mortgaged from 2000 to 2005, and yet 30% of customers switched home insurance and 53% of people switched car insurance.
The savings you could make re-mortgaging are even greater than what you could save by changing insurers. Yes, you could incur redemption penalties, usually because you've just come off a discounted or fixed rate deal. But, even if you have a redemption penalty to pay, it may add up in your favour anyway.
Let's say you had a £60,000 interest-only mortgage paying the standard variable rate of 6.54% with your current lender, and you switch to a fixed rate mortgage of 5.19% with a new lender. Your monthly payment would fall by £67.50. Let's say you had to pay a redemption penalty of £1000 to remortgage. But over two years you would save £1,620, so that would be worth it.
People who don't remortgage are often scared off by the thought of the work they'd have to do and all the form filling. They suffer from apathy, but its misplaced, because re-mortgaging is easier than ever, especially with lenders trying their hardest to poach customers from each other.
So, how does it work? Well, the best way to find out what other deals there are on the market is toclick to apply on-line. We'll give you a comparison and tell you what you can save when changing to a different deal.
Once you have chosen your new mortgage, you can start the application process. In some ways, you then have to jump through the same hoops as when taking out your first mortgage. Your new lender will need to value your home, your solicitor will have to do some conveyancing work and you may need to prove your income again. We will advise you further.
You will need to decide how much to remortgage for. You can remortgage the exact amount left on your mortgage, or you could borrow more, to take advantage of the equity in your home. Most lenders will allow you to borrow up to a certain amount, and this is a cheap way of borrowing money.
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