Mortgage information

It is estimated that more than half of all borrowers are continuing to pay over the odds for their mortgage each month.

Usually these people are paying the lender's standard variable mortgage rate. There will be lower rates available from other providers

Remortgages can allow a homeowner to both save and raise money. Switching to a mortgage with a lower interest rate allows borrowers to dramatically reduce their monthly outgoings, as well as giving them the opportunity to release cash stored in their homes.

Save Money

The UK mortgage market has become an increasingly competitive environment, with every lender trying to gain a larger share of the market place by offering discounted interest rates and incentive deals to attract new customers. Although these deals are aimed primarily at first time buyers, many existing mortgage holders are switching deals to take advantage of the great deals on offer and making substantial savings as a result.

Periods of discounted or fixed interest rates are usually only for one to five years, before reverting back to the lender’s Standard Variable Rate (SVR). If you’ve had your mortgage for longer than three years, and have recently experienced a noticeable rise in your mortgage repayments, then maybe you could benefit from a remortgage.

By shopping around for the best deal, you could save thousands of pounds every year. Even if you have an early repayment charge, the amount saved by paying lower interest rates is often larger than any penalties payable if you settle your loan early.

Raise Money

Equity is the difference between the value of a property and the outstanding mortgage secured upon it.
Because of the recent in rise in property price there is a large difference between homeowners' properties and the mortgage amount left to repay – it is estimated that there is up to £3 billion worth of equity stored in houses throughout the UK.

Homeowners can access this hidden cash with a remortgage. By changing mortgage products and borrowing further against the value of the property, borrowers end up with a lump sum of cash in their pocket. This money can be used for any purpose – many borrowers have remortgaged to consolidate debts, pay for a child’s education or home improvements, or have just used the spare cash to gain a bit of breathing space.

Because the money is secured on a property, the interest rates are usually considerably lower than an unsecured loan or a credit card. This means you can not only consolidate your debts into one easily managed monthly payment, but you will also decrease the total amount of interest you pay each month.
However, when considering extending your mortgage amount it is important to think carefully. Your home may be at risk if you fail to keep up repayments on your mortgage.

Poor Credit Remortgages

Poor credit, otherwise known as bad or adverse credit, can be a severe hindrance to anyone trying to find a mortgage or remortgage. Details of your credit history, which is held on your credit record, are checked whenever you make an application to a mortgage lender.

If you have a blemish-free credit history then most lenders will have no problem in accepting your application. However, if you have experienced County Court Judgements, mortgage arrears or bankruptcy, then lenders will see this information on your credit file and may decide that lending large sums of money to you is too risky. Your application may be declined - but do not despair.

With an estimated one in four UK homeowners suffering from poor credit, there are now many lenders who specialise in providing mortgages for this growing market, known as sub-prime lenders. These lenders are willing to accept the applications of high-risk borrowers, however they will charge slightly higher interest rates as a result. This will increase the overall cost of the mortgage and may increase your monthly mortgage payments.

However, as long as the required mortgage payments are met, after three years your credit history may no longer be considered as "poor" as you will have proved yourself reliable once more.

Interest Rates Explained

One of the main reasons why so many people remortgage each year is to take advantage of the lower interest rates which lenders offer to attract new customers. These periods of discounted interest rates usually only last for a limited period, before reverting back to the lender's Standard Variable Rate (SVR). The lender’s SVR is usually the most expensive option, and most lenders rely on their customers staying with them and paying the higher rates of interest.
If you believe you could reduce your monthly outgoings by remortgaging, then we recommend having at least a basic knowledge of what deals are available.

We have provided a brief guide to get you started:

Variable Rate Mortgages
Variable Rate Mortgages are linked to the interest rate which the Bank of England (BoE) sets each month – known as the base rate. This means that although the interest rates for a Variable Rate Mortgage will drop when the BoE’s base rate drops, you have no protection from any rate increases that may occur.
There are a number of different variable rate mortgages available, including standard rate mortgages, discounted rate mortgages and base rate tracker mortgages.

Discount Mortgages
Any mortgage that offers an initial period of discounted interest rates, usually lasting from anywhere between 1 – 10 years, is known as a discount mortgage.
Discounted mortgages are usually at a discounted rate from the lenders Standard Variable Rate. So, for example, if a borrower has a 2% discount and their lender’s SVR is 5%, the borrower will be repaying interest at 3%. If the lender's SVR rises, then so will the interest rate the borrower repays.

Fixed Rate Mortgages
Because the interest rate you pay is fixed, whatever happens to market rates will not affect you - your monthly repayments will remain the same. Fixed rate mortgages usually last between two to ten years, although it is now possible to get a fixed rate mortgage lasting up to 25 years.
Aside from offering constant monthly repayments, many borrowers switch from a variable rate mortgage to a fixed rate mortgage if they believe interest rates are going to rise. However, these mortgages usually come attached with a fee and may have an early repayment charge.

What should I avoid?

Avoid deals with extended redemption penalties. While these had been phased out in recent years, a number of lenders have reintroduced extended penalties to clamp down on so-called 'rate tarts' who move around frequently to get the best deal.

Extended redemption penalties are often hidden in the small print of a mortgage contract and are sometimes called early repayment penalties or charges.

Before you agree to a mortgage you should be presented with a key facts document. This should outline all the mortgage charges and small print in plain English.

Always read the key facts document thoroughly and if you are unsure of any clauses take advice.

How do I apply?

Obtain a 'redemption statement' from your existing lender.

This will tell you how much you owe.

You must then complete an application form from your new lender, along with details about your income such as bank statements, payslips, a P60 form, mortgage statements and proof of identity.

Your new lender will value your home. This will cost between £200 and £300.

Most lenders will also charge an arrangement fee which can be anything from £200 up to over £1,000.

Some lenders offer dedicated remortgaging services with free legal work and valuations but others will charge for this service.

All in all it can take anything from a few hundred pounds to a few thousand to shift provider.

The golden rule is that the benefits of switching provider must outweigh any charges that are incurred.

WARNING: THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. LOANS ARE SECURED ON YOUR HOME.