For all the strange and seemingly confusing jargon, it's important to remember that shopping for a mortgage is essentially just like for anything else. At its simplest, you want to pay as little as possible for the best you can get. In the same way that you wouldn't want a contract that tied you into having to shop at just one supermarket for the next 30 years, so you don't have to be tied into one and only one mortgage provider for the whole duration.
The process of remortgaging, therefore, recognises that mortgage lenders are in a highly competitive financial market. A whole range of different mortgage products are on offer, at different rates, to suit the varying needs of different borrowers, whose precise needs are going to change over the years. Remortgaging, essentially, allows an existing mortgage borrower to switch lenders or to persuade an existing lender to offer a better deal. Try a comparison site like confused.com to find the best mortgages and deals for you.
And it's precisely this "better deal" that is the sole motive for remortgaging. You remortgage to get a better deal. To return to our analogy with supermarkets, remortgaging allows you to shop around for the best deal that suits your needs and your pocket right now. And, as often as not, you'll make the change because you can get just what you want at a better price - you can save money. And given the scale of your investment in a mortgage, those savings can be truly significant, running in to literally thousands of pounds! More than that, if you continued to shop around and changed to even better terms every so often, you could end up slashing loads off your mortgage.
But it's not only cash savings that can make remortgaging a sensible option. Perhaps the terms and conditions of your current mortgage are no longer the most appropriate to your needs or maybe they are just too restrictive. Remortgaging can be a way to secure the terms that are suitable for you right now, whatever the ones that might have seemed reasonable when you first took out your mortgage.
Is this really too good to be true? Is there a downside to remortgaging? Well, it's true that there's a cost attached to engaging with the market more proactively and more flexibly. It's a cost which you should be aware of, but not one which should necessarily dissuade you from remortgaging. As with any economic endeavour, it's really just a question of ensuring that any gains outweigh the costs involved. The costs arise because of the penalty you'll face in leaving your current lender, the fee you'll need to pay for signing up with the new lender, together with any necessary legal expenses.
In a short article such as this, it's clearly not possible to cover every angle of a subject as involved as remortgaging. Nevertheless, if the prospect is one you feel worth pursuing, the steps are really quite straight forward:
- Obtain a quote from your current mortgage provider, including any penalty for early termination. If they offer improved terms, conditions or repayment rates, there might not be any need to swap lenders anyway
- Shop around for any new mortgage offers that are appealing and obtain detailed quotes from these lenders
- Add together the penalty fees from your existing lender and the joining fees required by any new lender to calculate the cost of your remortgage
- Calculate your mortgage repayment savings over a given number of years, subtract the costs you arrived at in the 3rd step, and see whether it's worth making the switch
- If you decide to proceed, make the formal application to the new lender you've chosen
- Allow between one and two months for the valuation of your property to be made and for any necessary legal processes
- Sign the new mortgage deed, sit back and enjoy the new deal!
