Guide to remortgaging

Why remortgage?

People usually decide to remortgage for a one of a few different reasons. It may simply be that their current mortgage deal isn't that great and they find they could be saving money if they switch to a different deal. Alternatively, they may wish to borrow more money on a new mortgage so they have some extra cash. Also, some people find that their existing repayment conditions will have them continuing to pay off their mortgage after their planned retirement date, which they may not be able to afford.

With a long-term view, you can save a significant amount of money by remortgaging, so if you are struggling to meet your repayments, it's time to look into alternatives.

Drawbacks to consider

Look at your options carefully before you decide to remortgage. Remember, there are costs involved in the process, such as legal fees and valuation costs. Depending on your situation - and you should check this with your current lender - you may have to pay a redemption penalty. A redemption penalty is a charge levied by your lender if you pay off your mortgage before the agreed repayment term comes to an end.

Do your research and try to get a clear picture of how much remortgaging will cost you immediately, and weigh this up against the savings you can make long-term. If you can afford it, and if the long-term savings are worth it, then absolutely start to look into remortgaging. If, however, the short-term cost is going to be unfeasible, you may need to reconsider your remortgage plans.

Another thing to think about, if you're considering remortgaging in order to release the equity you have in your property and get some extra money, is how long it will take you to repay the new loan. What amount of time are you adding to your mortgage repayment term if you change your product? Is it worth it?

Steps to take

So you've carefully considered all of the above and decided remortgaging is the right option for you. Use this step-by-step guide to help you through the process.

1. Look around for a better mortgage deal than your existing one. Be patient and do your research thoroughly - or alternatively, use a remortgage broker to find the best deal for you.
2. If you've found a better deal, approach your current lender before you make the switch to see if they can match it. They may prefer to give you a lower rate than to lose you as a customer altogether.
3. Calculate the savings you could make by switching your mortgage product.
4. Subtract any costs involved (e.g. property valuation, solicitor's fees and redemption penalty) from the potential savings. If you are still able to save money by switching, then it's probably worth pursuing the remortgage.
5. Submit an application for your new mortgage. The lender will then make you an offer in principle. This means that they will grant you the requested loan 'in principle', provided all the information you have given them is correct.
6. Your new lender will arrange a valuation of your property.
7. Hire a property solicitor, who will obtain a redemption statement from your current lender and carry out the conveyancing.
8. Once your property valuation is complete, your new lender will make you a formal mortgage offer through your solicitor.
9. Looks good? Then it's time to sign the documents and start saving money on your repayments.