Does the prospect of going through a remortgaging exercise fill you with panic?
You’re not alone. Recent research shows that “one in four homeowners experienced stress during their most recent mortgage application”. That is the equivalent of 2.5 million people.
The main reasons people gave was a lack of communication and transparency from lenders.
Other findings were that, in the 25 to 34 year old age range:
- A quarter (25%) found mortgage deals confusing.
- Almost one in three (29%) rarely understood where they were in the application process.
- This group was more likely (44%) to remortgage with their current lender rather than take the time to shop around.
It’s regrettable that remortgaging can seem so demanding, given that for most people it is such a simple way to save money. Streamlining what is your largest debt can give you your biggest saving.
For those moving from their lender’s Standard Variable Rate or whose current fixed deal is about to end, this can add up to thousands of pounds each year.
So if you’re considering a remortgage switch, what can you do to make the experience more stress-free?
1. Use a Broker to Look after Your Remortgage Application and Absorb the Stress and Hassle on Your Behalf
Are you someone who fully understands the remortgaging process? Are you confident you can do all the sums required to determine the best deal for you?
Then you could bypass the broker and do most of the work online. But this will need time. Going direct is unlikely to find you the best deal. This is unless you have the time to check every lender in the market and all the terms and conditions.
The fact is there’s more to remortgaging than just looking at the rates. You need to be able to match yourself and your circumstances as a borrower with the right lender.
The type of property, construction and location also play a part in deciding the right lender. You will also need to factor in the various fees associated with remortgaging. These may include the arrangement, valuation, reservation and legal fees.
Mortgage advisors will know which lenders are providing the most efficient service. They might have access to certain products with incentives attached. They will be able to do everything quicker than you.
What is the advice of Martin Lewis of Moneysavingexpert.com? “You can, and often should, use a broker to help find the right deal. They’ve info unavailable to consumers, eg, lenders’ credit and affordability criteria. A good broker can ease acceptance by matching you to the right deal – and the application process is quicker.”
2. Get Your Paperwork in Order Before You Apply
You will have to organise your paperwork for your application. There’s no way of avoiding this, as any lender will need the lowdown on your financial situation. So it will make the process far smoother if you’ve got it all ready and in front of you. What should you prepare? The following list:
- Proof of income. This is usually your last three months’ payslips, or two to three years’ accounts if you’re self-employed.
- Last three months’ bank statements.
- Proof of bonuses/commission.
- Your latest P60 tax form (showing your income and tax paid from each tax year).
- SA302 tax return forms, mainly for the self-employed. These are copies of your self- assessment tax return.
3. Work out the Type of Remortgaging Deal You Want
You might change your mind on this when you talk your situation through with a mortgage advisor. But it’s worth getting clear in your own head the type of product you’re aiming for. This might be:
A Fixed-rate Remortgage
With a fix, no matter what happens to interest rates, your repayments are set in stone for the length of the deal. Fixed terms tend to be two, three, five or 10 years. They give you financial security for budgeting. This is good in times of economic uncertainty, such as we’re experiencing now with Brexit. When the fix reaches the end of its term, you will move to your lender’s (higher) standard variable rate.
A Variable-rate Remortgage
With a variable, your mortgage rate will not be stable. It will move up and down in line with changes to the Base Rate. Variables can be a tracker, a standard variable or a discount rate. You will get the benefit of an interest rate drop with a variable but your payments can differ from month to month.
If remortgaging still seems stressful, then consider this. You could do nothing and remain on your lender’s standard variable rate, paying more than you need to. Or you could remortgage, reduce your monthly repayments and use the money you’ve saved on something else.
If you need help in finding the right remortgaging product for you and navigating your options, we’ll be happy to help you here.