When remortgaging, finding the best mortgage deal can be difficult without an independent adviser by your side. Veracity Financial Planning will take the stress out of the process and will work with you to find the best deal.
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When you first took out your mortgage, you would most certainly have taken a special rate dependent on the factors that were important to you at the time. This special rate will have a short term (2, 3 maybe 5 years) so when this special rate ends the interest rate will revert to the lenders standard variable rate (SVR), this means that it will probably be linked to the Bank of England’s (BofE) base rate and will go up or down as and when the BofE rate does; it will usually be considerably higher than the original special rate. This may mean that your monthly repayments will increase significantly.
It is therefore important that around 3 months before your special rate comes to an end that you start to look for a new special rate deal, either from your existing lender or with a new lender.
In some cases you will not have any extra costs to re-mortgage with the same lender, however, you may find a new lender that will offer you a lower interest rate which makes it worthwhile considering, even if there are other costs involved.
It is often worth consulting your adviser which deal works out cheaper. In many instances, it is often difficult at first glance to recognise which deal is best.
If your re-mortgage doesn’t involve raising extra money or changing the overall term, it should be fairly straightforward. Generally, no legal fees, valuations, or re-assessment of affordability would be required.
Whilst you may need to re-mortgage to stop yourself from falling onto the lender’s SVR you may also decide to re-mortgage to take some equity out of the property to help fund a multitude of things, ranging from, home improvements, vehicle purchase, debt consolidation, or maybe even a family holiday. This is also known as capital raising.
In this case, the lender will want to reassess your liabilities and your income (to find out how much you could borrow, take a look at our maximum borrowing calculator) and whether your requirements fit their criteria, in much the same way as when you first took out the mortgage. In this instance, you can either take a further advance from your current lender or raise capital with another lender.
If you pay your mortgage on a capital & interest basis over a few years the amount of loan reduces and your equity in the property increases.
You may have a house valued at £200,000 that has £100,000 outstanding on the mortgage. The equity left in the property is £100,000.
Some lenders may consider capital raising up to 90% of the property value, this depends on your circumstances and what the capital raised is intended for. This can be done with your existing lender, but another lender may allow you to raise more or they might have a better deal. In which case it is certainly worth considering changing lenders at this stage.
When you agree a special rate with a lender, they want to tie you in to that deal for a certain period of time (2, 3, or 5 years). The way they do this is by penalising you if you were to leave earlier than the agreed period. This is called an early repayment charge (ERC).
This is often a percentage of the outstanding loan and may reduce during the period.
In some instances, you may find deals without any ERC’s but this flexibility is usually traded for a higher interest rate.
As independent mortgage advisers, we can offer you deals from across the whole of the market. We work with a range of lenders, high-street and challenger banks who will be able to lend to most clients, specialist finance lenders who may be required for more unusual financing needs and private banks for individuals looking for a mortgage for more than £500,000.
We work with our clients in Nottingham and the East Midlands to understand their unique circumstances and find bespoke solutions to get the best deals on the market.
If you are looking to re-mortgage and would like to discuss your mortgage please;