Five steps to an easy remortgage

Don't struggle to move your homeloan. Switch and save the smooth way!

After 18 months of remortgage apathy the tide seems to be turning, with more and more of us switching our homeloans.

The number of people remortgaging increased slightly (6%) in June to 27,000 according to the Council of Mortgage Lenders, as fears over the economy and looming job cuts jolted many into taking action.

But if you are contemplating changing your homeloan, what do you need to do to ensure a smooth, swift switch?

Below are our five steps to remortgage heaven, ensuring you cover all the bases and switch to a great new deal rather than a dud.

1) Do your research

First things first, you need to do a bit of background research before you throw yourself headfirst into the remortgage market.

Look at your current deal and work out what it will cost you to leave. If you have Early Repayment Charges you could be forced to pay a percentage of your outstanding debt (often around 3%) just to get out of your deal, so it could be worth waiting until these nasty charges expire. ERCs usually last for the same duration as your initial deal period, but some last even longer so double check.

You will also have an exit fee to pay, costing around £250, but fees vary so find out what yours is. If you are unsure ask your existing mortgage lender to work it out for you -- and at the same time ask if they will offer you a better deal. It’s worth knowing what you can get from them before you begin your search elsewhere.

2) The type of mortgage

Now comes the big decision. What sort of deal do you want for your next mortgage -- a fixed or variable rate?

This simple question is one of the most important and there is no right answer. It depends on your own circumstances, your attitude to risk and what you think will happen to interest rates (if you have an opinion). If you are remortgaging because you are worried about being exposed to rising interest rates, you may have already decided on a fixed rate. Or you may be happy to take your chances on a variable rate if you are simply remortgaging to get a cheaper deal and minimise your monthly repayments.

Variable rates are currently priced significantly lower than fixes but, of course, you must be willing to accept that your pay rate could rise if the Base Rate goes up. If you are unsure, contact an independent mortgage broker, like those at lovemoney.com, who will talk through your options and advise you on the best type of deal for you.

3) Get searching

Once you have a good idea of the type of deal you want, it’s time to search the market. You can do this the old fashioned way by traipsing up and down your high street visiting banks and building societies to get information. But unless you want to take a day off work you might struggle, as many don’t open on Saturdays, or they close early. Plus you will miss out on all the deals on offer from lenders who do not operate through branches, or don’t have one in your area, as well as the many lenders that only distribute their mortgages through brokers.

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It's far better to search using lovemoney.com’s innovative mortgage tool, which sorts through thousands of mortgages to find the best one for your needs -- and it includes both direct and broker deals. It saves you time, hassle and shoe leather. Of course, you could also take advice from an independent broker who will search the market for you, and tell you which lenders are currently hot on service and which are dragging their heels.

4) Do your sums

It’s vital that you work out the total cost of any new deal over a set period. And this means looking at both the interest rate, which determines your monthly repayments, as well as the arrangement fee. These fees can range from zero to £2,500 or even higher, and can really skew the cost of your loan. So what looks like a great low rate might be offset by a high fee that renders the mortgage expensive in terms of total cost.

On the other hand a rate that doesn’t look too appealing can actually work out a great deal if it comes with a low fee, or no fee! You must take both rate and fee into account when comparing deals, and any cashback if it applies. This does make it a lot harder to compare mortgages at a glance, but if you use the lovemoney.com mortgage tool it does the hard work for you, showing the total cost of all deals over your preferred period.

Easy!

5) Application time

Finally it’s time to apply for your new mortgage.

If you have used lovemoney.com to search for your mortgage you can usually apply directly online -- plus you can call us for help at any time. With some deals we may transfer you to the lender’s website where you will be able to make a direct online application there. Alternatively you can call us, or get in touch via the website, if you would prefer to go through our free broker service. This way, you can chat through your details over the phone and our brokers will give you advice.

Even better, they’ll do the hard work for you, helping you make your application and chasing the lender to make sure your remortgage goes through as quickly as possible.

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