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While obtaining a new mortgage offers several significant advantages, there are also a few situations where remortgaging is not recommended. Before you apply for a new mortgage, make sure that you understand the pros and cons of remortgages.

Whether you have recently found a job in a new town and you are planning to relocate as opposed to commuting while keeping hold of your existing home, or you are looking to purchase an additional property as a holiday home or as a place to stay throughout various times of the year, a second mortgage can help finance that decision.

With present-day mortgages at an all-time low in terms of borrowing costs and setup fees, many people are using the equity in their existing properties as deposits for their new homes in order to reduce the monthly repayments.

Examine your existing mortgage deal carefully.

The whole purpose of remortgaging is to get a better deal than the one you already have. If you are not going to save any money by switching lenders, then there is obviously no point in refinancing in the first place.

Even if there are hefty exit fees involved with your current mortgage, you could still find yourself much better off by getting a better deal. Some of the most popular remortgaging products that could save you money as a homeowner or mortgage holder are as follows:

  • Base Rate Trackers: These mortgages follow the Bank of England base rate, and they currently offer superb value for money, particularly as the interest rate is at the lowest level it has been throughout the entire history of the UK banking system. If you mortgaged your property a number of years ago, a base rate tracker product is practically guaranteed to save you a considerable sum on your monthly outgoings over the next few years.
  • Variable Rate Mortgages: Just like a base rate tracker, a variable rate mortgage is a remortgaging product linked to the Bank of England base rate, boasting similarly low interest charges. Of course, the UK interest rate will not always be this low, so if you are considering a replacement mortgage, then it makes much more sense to act sooner rather than later.
  • Variable-rate mortgages with a cash back option: Some mortgage products offer the borrower a cash back option as an added incentive for dealing with a particular lender. However, if you already have a variable-rate mortgage with a cash-back offer in place, you will usually need to repay or forfeit the bonus before your lender will allow you to switch to another bank or provider.
  • Flexible mortgage: If a mortgage is truly flexible in nature, then your current lender should allow you to switch providers without introducing a heavy penalty. Again, remember that if you are considering remortgaging, you should always check the fine print of your existing agreement before doing so.

Potential savings

When changing products from one provider to the next, it is always important that you consider the involved costs of doing so, along with any applicable rate changes that may either leave you better or worse off in the long run.

Although our online mortgage repayment calculator will give you a quick and reliable insight as to the overall cost of borrowing, along with the fixed monthly repayment amount, it is not designed to provide you with all the information you need before making a decision. For this reason, it is always a good idea to speak with one of our FCA-authorised and regulated advisors in order to get the full picture.

Different products can vary enormously in value due to the fact that different lenders have different borrowing costs. This includes things like legal fees, surveying costs, administration charges, and early repayment fines or penalties.

As a leading UK property finance company, we deal with an extensive panel of lenders on a daily basis, and we are always able to help by sourcing the most flexible borrowing products with the most competitive rates and the lowest fees. This is done in accordance with your own specific remortgaging needs. In effect, our experienced team can help you save money almost immediately.

Applying for your new mortgage

Once you have worked out the facts and figures using our repayment calculator and have uncovered how much better off you could be by refinancing, the final step is the application process. At Donkey Finance, our dedicated remortgaging experts are always ready to help you switch providers swiftly and effortlessly, while also helping to reduce your monthly repayments with the minimum of stress.

As truly independent mortgage brokers, we have access to an entire market of lenders offering a diverse range of products at the most competitive rates in the industry.

Our dedicated remortgage payment calculator is designed to help you see just how much better off you would be if you were to consider taking out an alternative, lower interest rate product. One with reduced fees and more flexible repayment terms.

Simply give us a call or use our online contact form and let our qualified team of qualified advisors improve your finances right away.

What is a remortgage?

Remortgaging is essentially a method of replacing your existing mortgage with a new one. The lender that you use to obtain the remortgage takes over the mortgage from your previous lender. Homeowners often choose to remortgage their property when interest rates are lower. With a lower interest rate, the monthly repayments may be lower.

How do remortgages work?

A remortgage is simply the process of moving from one mortgage deal to another. In some instances, borrowers remortgage with the same lender, swapping their current deal for a better or more affordable one. Remortgaging is most common when an introductory deal or discounted rate on a mortgage comes to an end, at which time the borrower may consider other mortgage deals with the same lender. However, there’s also the option of switching to a completely different mortgage provider.

Competitiveness routinely drives lenders to offer incredible deals for those willing to switch from their mortgage lender and loan. As the best deals are almost always available exclusively for new customers, shifting mortgage providers on a regular basis can amount to significant savings. If a competing lender is able to offer you a better deal, it simply makes sense to switch.

Nevertheless, it’s important to carry out a whole-of-market comparison before making such an important decision. In addition, you’ll also need to consider any additional borrowing costs or terms the new mortgage brings into the deal. Seeking independent advice before going ahead is essential.

How to compare remortgages?

The vast majority of major high-street lenders offer a variety of remortgage options. In addition, there are dozens of specialist lenders offering exclusive deals and discounts you won’t find on the High Street. Comparing the UK market in its entirety, therefore, means working with a specialist broker. Finding the best deal means setting your sights beyond the high street banks.

With a remortgage deal, it isn’t only about securing a lower APR. It’s also about any additional borrowing costs incurred, along with the quality of service provided by the lender. Not to mention the complexity and inevitable delays involved in the application and switching processes. There are countless factors to take into account, emphasising the importance of seeking independent support. Still, get it right with a good remortgage deal at the right time, and you could wipe thousands off your outstanding debt. If you’re currently locked into a deal that’s anything but competitive, contact UK Property Finance to discuss the alternative options available.

How much are remortgages fees?

Remortgage fees vary enormously from one lender to the next. Many remortgage fees are negotiable, particularly when working with an independent broker. Nevertheless, there are various fees and charges that accompany the remortgage process as standard. For example, you can expect to pay your current mortgage provider an early repayment fee. In a typical example, this could be in the region of 1.5% of the outstanding mortgage balance. Or perhaps a fixed fee, if agreed upon at the time the mortgage was taken out.

With your new mortgage provider, you can expect the same kinds of arrangement fees, valuation fees, and general administrative costs as when taking out a standard mortgage. Once again, however, all such costs can be negotiated and brought under control with the right representation. A quality remortgage has the potential to save you a fortune, but only if approached strategically and mindfully. Secure independent representation from an experienced broker, and be sure to compare as many deals and lenders as possible.

Where can you get a remortgage?

You can obtain a remortgage from the same lenders that offer new mortgages. Banks and various lenders that specialise in remortgaging often offer low interest rates to lure homeowners into remortgaging. However, a lower interest rate does not always help you save money.

When should you apply for a remortgage?

The primary reason for remortgages is to save money. When you replace your existing mortgage with a new one that carries a lower interest rate, you may pay less over the length of the loan. For several years, interest rates for new home loans have been historically low. Individuals who obtained a mortgage before interest rates dropped may save money by remortgaging. When you have a lot of equity in your property, obtaining a remortgage may provide an option for consolidating your debt. With this option, you roll your existing mortgage and debts into one loan, either to simplify repayments or to avoid penalties on your debt. Some homeowners may also choose to remortgage to cover expenses such as home renovations. The cost of the renovations is added to the remaining value of the existing mortgage, providing an alternative to a traditional loan.

When should you avoid remortgaging?

While remortgaging can help save money in certain situations, there are also situations where remortgaging is not recommended. For example, if you do not have a lot of equity, you may have trouble finding favourable interest rates for your mortgage. You may also want to avoid getting a remortgage if the value of your home has significantly dropped, you already have reasonable interest rates, or you are close to paying off your existing mortgage.

How does poor credit impact a remortgage?

The answer depends on the severity of the damage, when it was inflicted, and the cause. Not to mention the attitude the lender has towards poor credit scores. Just as long as the damage isn’t too severe, your remortgage application may still be accepted, albeit with somewhat higher overall borrowing costs.

Is it possible to remortgage with poor credit?

If you’ve had severe issues with your credit report for the last few months or so, you’re unlikely to be accepted. By contrast, if it’s simply a case of having missed the occasional credit card payment or purchase installment, the lender may consider the individual merit of your case. As it can be more difficult to secure a competitive remortgage deal with poor credit, it pays to work with an independent broker.

Last thoughts on remortgaging

Depending on interest rates, the value of your property, and other factors, there may be times when remortgaging is a smart decision. You can save money by getting a lower interest rate, using a remortgage to consolidate debt, or obtaining more financing.

Your mortgage is likely your biggest financial commitment. As every situation is different, you should always discuss your refinancing plans with a financial expert before applying for a remortgage.