Buying your first home can be one of the most stressful periods in your life. But who knew that remortgaging your home can be equally as stressful. We all have done the careful planning and research that goes along our first major purchase in life and made the important decisions that could help us safeguard our future.
Yet the same amount of forethought should go into your remortgage. Mortgage and remortgage expert Trussle underlines the importance of taking a look at your financial situation and current needs to search the market for a product or deal that fits your requirements. Whether you are looking to reduce your monthly payments, consolidate debts, raise more funds or release capital, take your time to consider these four things before committing to a new deal.
1. Get an accurate home valuation
Property prices continue to rise throughout most of the UK. According to the latest data by the ONS, the average UK house price is now £226,000. Therefore, it is a good idea to get an accurate assessment of your property’s value. To do this, get two or three estate agents to visit your property and produce a quick valuation. The more your home is worth, the lower your loan-to-value (LTV) will be, which directly impacts the amount of interest you pay. You should be aiming to reduce your LTV.
2. Small savings can make a big difference
Sometimes, even when we see better deals on the market, inertia kicks in and we avoid switching because of the hassle. However, you need to remember that a difference in interest rate, regardless of how small, can represent big savings over time. If we consider that the average mortgage term in the UK is 25 years, that hastily disregarded small difference can add up to thousands of pounds saved over the lifetime of our mortgage.
3. Mind the fees
In an effort to lure new customers, many lenders offer very low interest rates, but charge hefty fees to avoid losing money. So pay attention to the interest rate when comparing deals, but also take a look at the product fees and include them on your calculations. Depending on the size of your (re)mortgage, paying the fees will make sense or not. If you are taking out a large loan, it might be worth to pay the extra fee to secure a lower interest rate.
4. Read the small print
Before you go ahead and sign the dotted line with another lender, carefully read your mortgage agreement with your current provider. Does it include an early repayment charge? The early repayment charge is the amount charged to borrowers who repay the balance of their mortgage before their current deal ends. This charge could be triggered if you remortgage and move to another lender, so make sure you are aware of any potential penalties you will face before assuming you will save more money with the new deal.
Remortgaging your property is a huge financial commitment with long term consequences. You should spend as much time researching and choosing your remortgage loan as you did when you first took out your original mortgage. When in doubt, seek professional advice from reputable experts before entering into a new agreement.