Remortgaging - What to do if your fixed rate is coming to an end?

Mortgage rates change frequently and unfortunately they have gone up considerably in the last few months, causing considerable strain for borrowers. The good news is that lenders have agreed to a new Mortgage Charter, which has been designed to make the process of getting a new deal easier and gives greater flexibility to borrowers who are struggling with payments to make temporary or long-term changes to their mortgage.

The process of remortgaging can seem a daunting task. Read on to learn more about the remortgage process and our top tips to put yourself in the best position.

You may have to pay an early repayment charge to your existing lender if you remortgage.

What is remortgaging?

Remortgaging is the process of getting a new deal on your mortgage, whether that be a fixed or a variable rate. When you reach the end of your current deal you would usually automatically move onto the Standard Variable Rate (SVR) for your current lender. As the name suggests these rates are variable so can change at any time and at the time of writing the average SVR is at 7.5%. To avoid moving onto the SVR you can take out a new mortgage product, either with your current lender or with a new provider.

Should I stay or should I go?

When you come to the end of your mortgage deal you will usually have two options available to you: staying with your current lender by completing a rate switch or switching to a new lender. Your mortgage broker can assess all the information and advise you what the best deal is. Once you are happy with the details they will then apply for the mortgage on your behalf.

Additional Borrowing

Depending on your loan to value (the percentage of your borrowing against your property value) it may be possible to borrow more on your mortgage. This can be for things like buying a car or other asset, paying for improvements to the property or repaying debts. Caution should always be observed when adding existing unsecured debt onto your mortgage as it could end up costing you a lot more over the mortgage term.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Top Tips:

1. Start early.

These days many mortgage lenders will give you a formal mortgage offer which lasts for up to 6 months. This means that you can guarantee your deal well in advance of your current rate ending and avoid any nasty surprises by going onto the standard variable rate. Contact your mortgage broker at least 6 months before the end of your current deal. It has recently become more common to secure an ‘insurance rate’ – for example tying in a rate 6 months ahead means this is a worst case scenario. If interest rates go down you will likely be able to move to the cheaper rate. Again, starting the process as soon as possible is crucial.

2. Get your documents ready.

Mortgage rates can change at a moment’s notice so it is really important to make sure that you have important documents to hand to avoid delays. If you’re employed these should include your latest 3 month’s payslips and 3 months bank statements as a minimum and if you’re self-employed it will be your last 3 years’ personal tax calculations and tax year overviews. You may also need to provide proof of ID and other documents so make sure these are all readily available. Delaying could mean missing out on the best deal.

3. Estimate your property’s value.

You will need to have an idea of how much your property is worth before starting the process. A new lender will complete a valuation but providing a figure that is fairly accurate is better than plucking a figure out of the air. Websites such as Rightmove or Zoopla can help to give you an indication of how much similar properties sold for, if you don’t know where to start.

4. Get your accounts in order.

Before remortgaging it’s a good idea to review your bank accounts and credit cards to make sure that they are in good order. For example, regularly using an overdraft not only means that you may be paying very high interest charges but can be a sign of an ongoing problem or living outside of your means. To a mortgage lender they will regard this as a commitment and will apply greater scrutiny if you go over any limits.

5. Get a copy of your credit report.

This isn’t a requirement but it can be useful, particularly if you have a lot of unsecured credit (loans, hire purchases, credit cards). Credit scoring is the first stage of a mortgage application and your credit report shows the information that credit reference agencies hold about you. If you should fail a credit score for any reason getting a copy of your credit report would be a necessity so it’s a good idea to have a copy just in case. Follow this link to get a copy of your credit report.

6. Get your legal paperwork completed in time

When switching to a new lender there is some basic legal work involved. A solicitor or conveyancer will manage the transaction of moving the funds from one lender to another so they are a key part of the process. Legal work is often paid for by your new lender but it’s important that any documentation sent to you is completed as quickly as possible to avoid any delays in the process.

Your home may be repossessed if you do not keep up repayments on your mortgage.