Top 5 pitfalls to avoid when remortgaging your home

Remortgaging your home is more or less the same process as getting the mortgage when you first bought the property; however, it’s important to bear in mind that your circumstances may have changed. For example, you may have moved job – or even become self-employed, or had a family, and both can impact what you can borrow. In addition, the value of your property may have increased, which may mean you borrow a lower percentage of the property’s value – which can help secure a more favourable interest rate.

To remortgage, you effectively need to submit a fresh mortgage application. The lender will revalue your home, and you will be committed to the terms of the new product once your application has been approved – which may include an initial tie-in period.

The process can take some time, so you should plan well ahead and start looking for a new mortgage 6-12 months before your current deal or tie-in expires.

Here are five of the top potential pitfalls, together with suggestions on avoiding them and ensuring your remortgage goes as smoothly as possible.

1. Not using a broker

Although lenders often have exclusive deals for existing customers that may look enticing, a much more suitable mortgage product could be available via a different provider.

This is why working with a broker who is not tied to any particular lender is advisable. They can look at all current deals and help ensure you have the most appropriate product for your circumstances.

They can also help advise you on the best options for your circumstances without alerting the lender that you are considering remortgaging.

2. Not understanding penalties and fees

Sometimes, people aren’t aware of the fees their lender will charge for early repayment of a mortgage. Regardless of when you redeem a mortgage, most lenders will charge an administration fee for closing your account, which is commonly anywhere up to £300.

While this ‘exit fee’ may not be significant in the grand scheme of things, it is important to understand the early repayment charge (ERC) you will have to pay if you redeem a mortgage during the introductory period of a fixed-rate, tracker or discounted deal. The ERC is usually a percentage of the remaining mortgage balance, which reduces as the period gets closer to its expiry date. For example, if you have a five-year fixed deal, the ERC may be 3% in year one but reduced to 0.5% in year.

Sometimes, a new deal may be so much better than your existing one that it’s worth remortgaging early and paying the ERC. So it’s certainly worth enquiring if interest rates are coming down, regardless of how much time remains on your current mortgage.

3. Not considering whether your circumstances have changed

Your employment status, salary, debt position and even whether you’re single or married can all have an impact – positive or negative – on how much you can borrow. When it comes to remortgaging, you may find that you’re not able to get another loan at the same level as your current mortgage, or you could be pleasantly surprised at the options that have opened up for you.

So, if your circumstances have changed since you applied for your current mortgage, it’s well worth discussing this with a broker who can help you understand the effect it’s likely to have on your borrowing.

4. Not remortgaging often enough!

The vast majority of borrowers have fixed-rate mortgage products that give a preferential rate for an initial period. During this time, there is a financial penalty for redeeming the mortgage. Still, once it has expired, you should be free to remortgage and move to a different product with another lender if necessary.

Lenders usually release new products every three to four months, and they can be highly competitive with each other, which means there may be another product out there that may cost less each month than if you stay on your current deal once that initial discounted period has expired.

In simple terms, it is worth considering looking to remortgage every two to five years (depending on the fixed term) to be aware of any better mortgage products for your circumstances.

5. Not ensuring your home is presented as well as possible

Mortgage interest rates reduce as the loan-to-value percentage comes down, so the more your home has increased in value since you bought it, the better deals you should be able to access when it comes to remortgaging.

And in order for the lender’s surveyor to value the property at the best possible market rate, if they visit the property, it needs to be in the kind of condition you’d expect if it were on the open sales market: as well-maintained and appealing as possible. So, if you’re thinking of remortgaging, it’s well worth taking the time to carry out any necessary maintenance and freshen up the décor.

EAN Content

Content shared by this account is either news shared free by third parties or sponsored (paid for) content from third parties. Please be advised that links to third party websites are not endorsed by Estate Agent Networking - Please do your own research before committing to any third party business promoted on our website.

You May Also Enjoy

Home and Living

How to Protect Your Property from Flooding and Water Damage

Flooding and water leaks can cause significant damage to your home or office. However, many issues can be prevented by taking proactive measures to protect your property. In this article, we’ll explain how to minimize risks and prepare for potential water-related threats. 1. Inspect and Maintain Your Plumbing System One of the most common causes…
Read More
Breaking News

ONS House Price Index – November 2024

Headlines Average UK private rents increased by 8.7% in the 12 months to October 2024 (provisional estimate); this is up from 8.4% in the 12 months to September 2024. Average rents increased to £1,348 (8.8%) in England, £766 (7.9%) in Wales, and £976 (6.6%) in Scotland, in the 12 months to October 2024. In Northern…
Read More
Breaking News

Foxtons Lettings Market Index October 2024

Headlines October saw the highest level of new stock entering the market, with an 8% increase from last year, the highest increase in four years October’s demand is marginally lower than last October and decreased 32% from September, as expected during this time of year Following a yearly high of £593 per week this September,…
Read More
Breaking News

Breaking Property News 20/11/24

Daily bite-sized proptech and property news in partnership with Proptech-X.   Proptech powered lettings service for BTR developers needing pre-approved, quality tenants at speed gets funding A proptech-driven letting agent has secured close to £500,000 during its first equity investment raise. Property Sense, headquartered in Stockport but operating nationally, secured the half a million pounds in…
Read More
Kerb appeal
Estate Agent Talk

Why November and December are the best and most affordable months to buy

Buyers and sellers looking for the right time to move can consider top reasons from property experts to start the process this November and December. The autumn and winter months may not be the first that come to mind when considering a move, but potential buyers and sellers can be reassured by the experts that…
Read More
Breaking News

Farmers protest outside Westminster today in anger at the IHT ongoing debate – expert legal view

With today’s news about farmers set to protest outside Westminster in anger at the IHT ongoing debate, Tom Gauterin, Director at national law firm Freeths, said: “Although it is good to hear Mr Reed last week suggest that the Government is listening to farmers, today’s protests would suggest otherwise with the extent of their concerns…
Read More