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Top tips for remortgagors

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Switching to a new mortgage can bring down the cost of your largest monthly expense.

However, remortgaging does incur fees, so it is important that you do your homework. Ask your lender or adviser the following 10 questions to make sure you are as well informed as possible before proceeding.

1. What types of remortgage deals are available and how do they work?

Many lenders offer a wide range of remortgage products – fixed rates, capped rates, discounts, cash-backs, flexible deals and Base Rate trackers, for example. Make sure the new lender or advisor explains the pros and cons of whichever deal or deals you are interested in.

2. What interest rate will I be charged on the new deal?

Whichever type of remortgage deal you opt for, the lender or adviser should tell you what interest rate you will be paying and, in the case of a fixed or capped rate for how long.

3. How much better/different will my new mortgage rate be?

The lender or adviser should be able to compare the new rate on offer with the old rate you were paying, and work out for you how much you will be saving per month (unless you are increasing the size of your mortgage at the same time, in which case repayments might not be coming down, or remortgaging to a higher fixed rate for peace of mind).

4. What is the standard variable rate (SVR)?

If you are going for a discount, fixed or capped rate you may have to pay their SVR when the mortgage deal finishes. While, as the name suggests, variable rates vary over time, comparing today’s SVR with that charged by other lenders may give you some idea of how truly competitive your new lender is.

5. What will the monthly mortgage payments be at the new quoted interest rate?

The adviser should tell you exactly what your monthly payments will be at the rate quoted. In addition, make sure they show you how much you would be paying at the standard variable rate to give you an idea of what you will be paying after your product term comes to an end.

6. What is an annual percentage rate (APR?)

The annual percentage rate (APR) has to appear in all adverts alongside the headline mortgage rate. APR’s are meant to provide customers with true reflections of the cost of loans, and help them compare different deals. In practice, the APR is unreliable and no substitute for individually-prepared quotes listing all upfront and ongoing costs.

7. What are the early redemption charges (ERCs)?

Most mortgage lenders apply early redemption charges (ERCs) to certain deals, such as fixed rates and discounts, for example. An ERC is usually calculated a several month’s interest on a loan, and can run to thousands of pounds. You may be charged an ERC if you pay off or switch your mortgage within a certain time period. Before you remortgage, check whether ERCs apply to your existing deal, and if so, how much they will cost. And check whether the new deal will carry early redemption charges too.

8. Will I have to pay remortgage arrangement fees?

Some lenders may pick up the tab for the valuation, and even pay your legal fees. Otherwise it may cost you a few hundred pounds.

9. How long should the remortgage process take?

How long is a piece of string? If there are complications, it may take a while to sort out a new deal. Most people who have remortgaged in the last year have sorted the whole thing out in a week, and some within a number of days. Your adviser, if you have one, should give you an idea of the timescale involved

10. Can I remortgage more than once?

You can remortgage as many times as you like, and as often as you like, provided you have sufficient equity in your property to meet the lenders’ requirements. But bear in mind that you may well be liable to pay ERCs if you are currently on a fixed, capped or discounted rate. And you may have to pay arrangement fees. But you should look at your mortgage every year and see whether remortgaging would save you money.

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