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How do I start?
The first place to start is to check with your current lender to see whether they would be prepared to offer you a more competitive rate of interest as this is far less costly and a simple process. Even if you are borrowing some more money, your existing lender may be able to offer you a further advance at a competitive rate.
If they are unable to provide you with the rate you are looking for, you should check the redemption penalties you may have to pay to switch to another lender. If you have no penalties you are ahead of the game. If you do have penalties you have to subtract their cost from the savings you would make by changing to a cheaper rate.
How much does it cost?
The cost is made up of a number of fees which vary according to the property value, and usually what is a fixed fee from the mortgage company for moving to the new deal.
The fees usually incurred in remortgaging are: valuation fee, lender's arrangement fee, solicitor's fee and disbursements as well as any redemption charges you may have to pay a previous lender. These fees do vary and you should obtain some quotations before you embark on the process to ensure the savings outweigh the costs involved.
Do some products pay for the costs of remortgaging?
There are some products available where some or all of the costs are paid for by the lender as part of a remortgage package. There are others available where only one or two areas are subsidised by the lender such as the valuation fee and or solicitor's charges. In addition, there are products available with cashbacks which in many cases cover all or part of the costs.
Do I lose state benefits or tax relief?
If you are unable to work through sickness or redundancy the state will not help with mortgage repayments for the first 3 months (depening on savings levels too).
There are insurance products available known as ASU (Accident, Sickness & Redundancy Cover) which will pay your mortgage repayments in the event you are unable to work due to sickness or redundancy, but this is an extra monthly cost.
What next?
You will have to decide which mortgage product you would like to take. There are thousands of mortgage products available at any one time and choosing the right one can be difficult - do you take a fixed rate, a capped rate, a discounted rate, a tracker rate or a combination?
The headline mortgage rate is not the only consideration. You have to look at the other conditions of the loan such as redemption penalties, lenders' arrangement fees and whether the lender insists on you taking their own insurances which can be more expensive than arranging them separately and whether you can take the loan to a new property should you decide to move.
Faced with so much choice and confusion, many people find that consulting an independent mortgage adviser takes the strain out of hunting for the right product. An independent adviser will have access to the entire mortgage market and can advise you on the best product to suit your needs and circumstances saving you the trouble of trawling the high street.
Alternatively, many personal finance sections of newspapers carry best buy tables for mortgages which will give you a rough guide as to what is available.
Do I have to have the house revalued?
Yes you do. The lender to which you will be switching will make a valuation of the property to determine it's in line with current market values. If you choose to have a full structural survey or home-buyers report when you purchased the property, you may not need to obtain such a detailed survey second time around.
Is the remortgaging process like moving home?
It's similar in that you have to go through the legal process with a solicitor, but it is far less complex. You don't have to exchange contracts with third parties and the deeds are already registered in your name. Once you have decided on a mortgage product, you will need to complete the application forms and the lender is likely to want to see your most recent bank statements and payslips and will probably want confirmation of your salary from your employer.
You will have to instruct a solicitor who will complete the necessary searches, transfer the report and title to the new lender and ensure your previous lender is repaid once the new lender has released the mortgage funds.
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