If you think that you are paying too much for your mortgage, it is quite a straightforward process to remortgage to a new lender. They maybe able to offer you a more attractive deal and save you money. But there are a number of things that you need to be aware of before you take the final decision.
A generation ago it was normal for a person to take out a mortgage and stay with the same lender until the mortgage was paid off 25 years later. Now there is much more movement in the market with many people changing lender several times throughout their mortgage term. Some borrowers even try to play the system and take advantage of lender’s special offers to new customers and move from one lender to another as soon as the special introductory offer has ended.
But you need to weigh up the pros and cons of switching. Although you maybe getting a slightly lower interest rate by remortgaging, there are also some costs involved. Here’s what you need to check. First of all make sure that you will not have to pay any redemption penalties for ending the mortgage with your current lender. These are often applied to fixed rate mortgages or discounted mortgages for a period of 2,3 or more years after they are set up. These can be quite hefty, in some cases running into thousands of pounds.
Check what the exit fees are, if any, on your existing mortgage. These are different from redemption penalties. You have to pay these when the mortgage ends with the lender. They are sometimes called mortgage discharge fees. Some lenders have been moving these up to discourage people from switching.
Many new mortgages will have an arrangement fee attached to them. These fees have also been going up recently. There are products on the market where the fee is around £1,000 or more. You may be able to add this to the loan so you don’t have to find the money out of your own pocket, but remember that you will then be paying interest on it.
Add to this solicitor’s fees, mortgage broker fees and valuation fees and you can see that there is potentially a lot of money going out. Making the decision to remortgage is not easy and requires a long, hard look at the benefits versus the costs.