Contents:

What is a remortgage? What is it going to cost to remortgage? Knowing what to look for Applying for your remortgage FAQ’s Where can I go to get more help? Remortgages Useful Terms Ask F

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What is a remortgage? A remortgage simply means that you are switching your mortgage onto a new deal and probably a new mortgage lender. It doesn’t necessarily mean that you are increasing the amount of the loan. People choose to remortgage for a few different reasons..... The end of your current deal may be near and you may want to take

advantage of another deal instead of going onto a variable rate of interest.

You may benefit by changing your deal midterm, i.e: Supposing you

had a £60,000 interest only mortgage paying the standard variable rate of 6.54% and you could change to a fixed rate mortgage of 5.19%. Your monthly payment would fall by £67.50. Suppose you had to pay a redemption penalty of £1000 to change deals. Over 2 years you would save £1,620 and is therefore worth doing.

You may have some equity in your home and want to remortgage to

release some of that cash and make some home improvements. In past years, people have remortgaged and increased their loan, then used this spare cash on other luxuries such as holidays etc. But, due to recent economic activity, Lenders are being much more cautious about how the extra loan is being spent.

Whatever the reason is for remortgaging, it is basically all about saving money!

The first thing to do, if you are considering remortgaging, is to ask your current lender for a redemption statement. This outlines your mortgage balance, the remaining term and any applicable redemption penalties.

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What is it going to cost to remortgage? You will incur several costs when remortgaging. It is very similar to when you applied for your very first mortgage.

Don’t overlook the costs!

Type of Cost Amount Description Solicitor

£200 upwards, depending on the value of the property.

These are fees payable for the legal work required for refinancing your property.

Valuation

From £200.

This is an independent valuation, quite often just a drive by inspection of your property. It is to inform the Lender what the property is worth. The Lender needs this information to confirm that they could recoup their money, if you did default on the loan repayments.

Mortgage Company

£400 approximately

This is for the application fee, also known as arrangement fee. It secures the amount of money you need, until all the administration has been done.

Some Lenders may have special offers which waive some or all of the above costs. In many cases you will find that deals which offer ‘free’ valuations etc normally are linked to mortgage rates which are slightly higher than those without the ‘free’ valuations etc.

It is also possible to add these costs onto your mortgage. BUT be aware that by doing this, you will pay interest on these costs over the term of the loan.

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Knowing what to look for.... As there are hundreds of different mortgage deals available, it is important that you compare like for like. There are several ways to shop around to look for the best deal... Online- this is a great way to compare rates Newspapers- best buy tables Broker- can do all the shopping around for you High Street- Many High Street Lenders will offer their best rates if you

go to them directly

When comparing deals always check what the repayment term is. The monthly repayments for a loan over 20 years will obviously be cheaper than the repayments for a loan taken over 15 year term. The same applies to the method of repayment for the loan. A mortgage which is investment or interest only, will be much cheaper than a repayment mortgage. When looking at deals offered by Lenders, you will notice that they mention a Loan to Value ratio (LTV). This is the amount of loan they are willing to lend on a property, compared to its value. For example: Suppose your house is valued at £200,000 and the mortgage you require is £100,000, your LTV would be 50%. People with LTV rates of 60% or less will be able to shop around and compare some of the lowest rates around, whereas those people with a LTV rate of 75% or more will find that there are not very many deals available to them.

The deal may offer cash back or free surveys etc, these are all great, but are you paying a higher interest rate to cover the cost of these freebies?

Think about whether these promotional deals are worth

their while.

When looking at the deals best suited for your needs always remember.... Key Points COMMENT Compare Like for like Compare similar repayment types

Compare similar repayment terms Know your LTV ratio Ensure that the rate that is shown is

available to you, based on your LTV Check the costs What are your initial fees?

Are there any penalties?

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Applying for your remortgage Once you have found a better deal, it is always worth approaching your current Lender with your findings. They may match your new offer in an attempt to keep your business. However, if they are unable to do this and you still want to remortgage, then you can proceed with a new application. The process may be different depending on where you sourced your deal: Online: Many Lenders will have an online application form and will

arrange a time to contact you to complete the application if you decide to apply.

High street: Most Banks and Building Societies will have a dedicated

mortgage advisor, an appointment may be required to discuss your options. The advisor will also assist you in completing the application.

Broker: The Broker will also assist you in completing the application if

you do decide to proceed. There are also Online Brokers who can provide information and the facility to apply to online.

When completing a mortgage application you will be required to provide the following information: Form of Identification. Proof of you residential address for the last 3 years.

Bank details.

Proof of Employment. Name and Address and up to 18 months wage

slips. Details of any other credit cards, loans or financial commitments.

Your current mortgage details.

Details of the property.

A copy of your Redemption statement.

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Frequently asked questions....

I want to remortgage to free up some more money to put in a new kitchen. Can I do this? Yes, in most cases Lenders will view this favourably as you will be increasing the value of your property. Request a redemption statement from your current Lender. This will detail any charges that you may incur by changing your mortgage as well as let you know how much you have left on your current mortgage. A new Lender will look at your Loan to Value ratio, and if this is around 60% they will be keen to lend you the extra cash to do the home improvements.

We currently pay into an investment mortgage, but would like to switch to a repayment mortgage. Is this possible? Yes this is possible. You should be aware that your repayments will probably be more each month, but you do have the guarantee that the loan will be paid off at the end of the term if you keep up with your repayments. You may also have to take out additional life insurance if your investment vehicle was providing this originally. See your Mortgage advisor for advice.

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Where can I go to get more help? To find a broker or mortgage advisor: www.brokerfinder.co.uk www.mylocaladvisor.co.uk General housing advice: www.adviceguide.org.uk/index/family_parent/housing.htm Complaints: www.financial-ombudsman.org.uk Governments Financial Watchdog: www.moneymadeclear.fsa.gov.uk

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Remortgages useful terms

Application Fee : when applying for a remortgage the borrower must pay the lender a fee to cover administration costs, etc.

Equity : Equity is simply the difference between the value of the property and your outstanding mortgage balance. Hence if your property has a current market value of £175,000 and your remaining mortgage balance is £50,000, then your equity is £125,000. As a rule of thumb you can expect to be loaned up to two thirds of your equity if you remortgage your property.

Mortgage Broker : Independent mortgage brokers scour the market in order to find you the best deal. However, some brokers maybe ‘tied’, which means that they can only advise you on products from a particular company. Don't be afraid to ask your broker if they are independent. If they are they could save you a lot of time and a lot of money.

Mortgage Redemption Statement : The first thing to do if you're thinking of remortgaging your property is to ask your current provider for a mortgage redemption statement, which outlines: mortgage balance, remaining term and any applicable redemption penalties.

Redemption Penalties : several mortgages have clauses intended to penalise borrowers if they redeem their mortgage before the agreed term. Redemption penalties are commonly associated with discounted, cash-back and capped loans. It's imperative that anyone considering remortgaging calculates whether it makes financial sense to pay these penalties, or to stick with their existing loan.

Redemption Penalty Overhang : redemption charges typically expire after a fixed period of time, after which the homeowner can switch loans without having to pay any penalties. However, some mortgages have extended clause which unfairly straitjacket the borrower. If you think that you've been hard done by; consider getting in touch with the Financial Ombudsman Service.

Term : The agreed length of time in which the mortgage is to be paid back. The most common term is 25 years.

Valuation Report : In order to remortgage a property you must have it independently assessed to establish its current market value. This is so the mortgage provider can assess the risk of any potential investment. As

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