There are two likely situations in which you might find yourself looking for a remortgage. You may be coming to the end of an existing mortgage deal, in which case you have a choice of automatically moving onto your lender’s SVR (Standard Variable Rate) or remortgaging to a new deal.
Secondly, you might be on an ongoing variable-rate or tracker deal but considering a remortgage – perhaps with another lender, perhaps to a fixed-rate deal.
Either way, it’s important to understand what’s involved in the remortgage process before you go ahead. There’s more information on remortgages here, but here’s a quick look at the questions you should be asking yourself before you start talking to lenders.
Would you be better off?
On the one hand, you may want to remortgage to a new deal with a better interest rate than you’re currently paying. In the current climate, this may not be too difficult: lenders are offering some of the lowest rates in years, and if you’ve kept up with your payments in the past then you’re more likely to get a better deal this time around.
You shouldn’t just remortgage for the sake of it. Sometimes when a fixed-rate term finishes, you may find that the SVR charged by your lender is actually significantly lower than the rate you were previously paying. But if it’s not, you should probably try to find a cheaper deal sooner rather than later.
Even so, you might still accept paying more if you’re switching from a variable-rate mortgage to a fixed-rate deal. A fixed rate means you’ll know exactly how much you’re paying every month, and you’ll be protected against sudden rises in your mortgage payments.
If you know you can afford it, it might be worth switching to a fixed-rate deal for the security it can bring, even if it is more expensive than your current arrangement.
Consider the added costs
Remortgaging rarely comes cheap. Mortgage lenders tend to charge some kind of arrangement fee, especially on fixed-rate deals, and this can often cost anywhere between £99 and £1,000 – sometimes more.
Most lenders will allow you to add this arrangement fee onto your mortgage to spread out the cost, but this will of course add to the total amount owed, and could increase your monthly payments.
Also consider the legal fees charged by your solicitor, which can also add up.
You must consider these additional costs, and whether you can afford them up front or if you will have to add them to your mortgage, before you start.