Posted on: 07-06-2015 in Mortgage & Property
Remortgaging is cancelling your existing mortgage and getting a new one, often (though not always) with a different lender. It can save you a lot of money when the right deal is selected at the right time, but many people are confused about the factors involved in this decision and not fully aware of all options. In this article, we will explain the benefits, the costs and other considerations.
Remortgaging Benefits and Motivations
Although by far the most common underlying reason for remortgaging is to save money, there can be a number of other motivations:
While you can save an enormous amount of money when remortgaging and getting a lower interest rate, there are also costs. You will have to pay two sets of fees – setup fees for the new mortgage, as well as exit fees for the existing mortgage.
Exit fees are typically very high in the first few years of a mortgage (during the lock-in period, usually 1-5 years) and then decline significantly. Therefore many people choose to remortgage shortly after the lock-in period ends.
Besides fees payable directly to the (old and new) mortgage lender, other expenses must also be taken into consideration, such as legal and valuation fees. Furthermore, if you are a busy person and value your time highly, don’t forget to also think about the time and attention it will require – sometimes saving a few hundred is not worth the hassle.
Best Time to Remortgage
When the lock-in period of your existing mortgage has expired, spend some time thinking about your situation and deals available on the market in light of the above listed benefits. Check the potential costs to assess whether the switch would be worth it.
One final piece of advice is to not try too hard predicting the future direction of interest rates, property prices and the mortgage market – even the professionals and central bankers don’t know the future.