04/06/2007

Time to remortgage?

Following May’s hike in interest rates, many standard variable rates (SVRs) are already as high as 7.75%, well over 2% higher than some of the best deals currently on the market.

‘If the discount or fixed deal on your mortgage is about to come to an end you might have a shock in store as lenders' SVRs have gone up considerably since you took your mortgage, typically more than a 1% increase in the last year,’ says Katie Tucker, Product Specialist for Charcol. ‘The process of remortgaging can be seen as a chore by some homeowners and many often leave thinking about it to the last minute and end up paying more than they need to.

‘Borrowers with a £100,000 mortgage could save £147 a month in pure interest simply by remortgaging from a SVR at 7.5% to a more competitive loan at 5.34% (75% annual percentage rate). The monthly saving is £450 for a mortgage of £250,000. As it is still uncertain how high interest rates will go this year, it is crucial for any borrowers whose mortgage is due to fall onto the lender’s SVR this year, to be aware of their revised reversion rate, and to do their homework to make sure they move onto the right deal.’

As people relocating in the UK are likely to have to remortgage, we thought it was time to put together some practical money-saving guidelines.

1. Be prepared and think ahead

• Allow two to three months to investigate and apply for your remortgage so it is ready in time for the expiration of your Early Redemption Charges.
• See what alternatives your existing lender can offer. Remember to ask how much your exit fee will be. The average is currently around £225.

2. Consider the term and features you need on your new mortgage

• Work out what really matters to you: is it the total cost over the next few years, having free valuation and legals, or just a low rate?
• Could you pay a little more each month to reduce the term?
• Do you want to raise cash to consolidate debts or make improvements on your property?
• Do you have savings that may suit an offset account?

3. Take the opportunity to review your insurance

• If you are changing the loan amount of your mortgage you may need to top up your life assurance or critical illness policies.
• If you have changed job or given up smoking this could affect your cover needs and premium.

4. Make your application

• At this stage you should seek advice to ensure you find the best mortgage deal.
• You will usually need to present one form of ID, and verification of your and address and income.

5. Contact a remortgage solicitor

• If your deal does not include free legal services or if you need non-standard legal work (such as a person going on or off the mortgage you will need a solicitor.
• Remortgaging is a simple process and does not require the same skills as for a purchase transaction. A solicitor who is cheap but efficient should suffice.Make sure they complete on the right day – the last thing you want is to be inadvertently made liable for Early Repayment Charges!

For more information tel 0800 358 5560 or visit www.charcol.co.uk.

© 2007. Re:locate magazine, published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein.