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.
A mortgage is really nothing more than a specialised type of loan that banks and building societies issue to those who qualify to enable them to buy a house. There are so many mortgages on offer that it has become essential to compare mortgages before coming to a firm decision. It would probably be possible to borrow money in some other way to finance the buying of a house, but mortgages are the easiest way to do so, and have become the accepted standard way.
When you consider buying a house you will probably also have to consider taking out a mortgage. Sometimes the different offers can be confusing and difficult to comprehend. For these reasons you need to carefully compare mortgages.
It is possible to get a 100% mortgage, meaning that you will receive a loan for all the money you need and not have to come up with an agreed deposit amount. This may seem attractive at first, but it is likely that the lender will charge you much more for their services, making this kind of mortgage less attractive than it may first seem.
It is even possible these days to get 120% or even higher mortgages, giving you some money to use over and above what you need for the actual purchase. But consider this: the value of your house will actually be less than the value of your mortgage. This is not a very solid basis for borrowing, as the only thing you have as security is the house itself. If it all goes wrong, where will you find the extra 20% from?
The mortgage rate of interest is probably the main element to consider when you compare mortgages. This determines how much over and above the actual amount borrowed you will pay back. Your main choice will be between a repayment and an interest only mortgage. This means that you will be paying either only the interest on the money you have borrowed, or you will repay a portion of the capital plus interest on the money borrowed. Of course, with an interest only mortgage you will still have to repay the capital at some time; you don't get away with it altogether!
There are many mortgage types to consider. There are first time buyer mortgages, self certification mortgages, buy to let mortgages, capped mortgages, discount mortgages, fixed rate mortgages, and more. Some of these are self-explanatory, but others may be confusing for someone who is not too familiar with the world of mortgages.
The first time buyer mortgage is of course aimed at the first time buyer. This is a relatively easy mortgage to secure as it takes into consideration the problems facing first time buyers. For example, people in this situation are probably young and do not have a long career history. They probably also don't have much savings either. Rather than discriminate against someone in this position, these mortgages make it easy to apply and receive.
A mortgage is probably the biggest amount of money you will ever borrow. For this reason it is vitally important that you compare mortgages carefully to be able to discover which one is best for you and you needs, as well as you repayment ability.
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