What is Refinancing?

Refinancing vs Remortgaging explained

You may have heard of the terms, Refinancing, or Re-mortgaging, there are lots of different terms in the mortgage world. This blog explains what this means in real terms. ​

What is Refinancing your Mortgage and what does this mean for you?

Refinancing a mortgage loan involves replacing your existing loan with a new mortgage loan, usually through a different lender. This is often referred to as a Remortgage. 

Your new mortgage will then replace your old mortgage. 

 

Refinancing tends to be more of an American phrase so you will likely hear the phrase Remortgage more often here in the UK.  

 

You may want to remortgage if you are coming to the end of your existing mortgage rate or looking for a better deal than your current lender can offer. 

Is it a good idea to remortgage?

 

If you are coming to the end of your existing mortgage deal, you are about to lose the interest rate your mortgage is currently on, and chances are if you do nothing, your monthly payments will increase when you revert to your lenders Standard Variable Rate. 

 

By seeking the advice of a whole of market mortgage adviser, we can explain the options available to you by comparing the mortgage deals in the market, to ensure you move your mortgage balance onto the most competitive mortgage deal available. 

 

Once you have come to the end of your current deal, and are considering a remortgage, this is when you can make changes to your mortgage, to suit your current and future requirements, For example, the benefits of remortgaging can to:

 

1.     Reduce your monthly payments

2.     Secure a better interest rate

3.     Reducing or increasing the mortgage term, to suit your affordability or future plans.  

4.     Raising further funds. We can consider the option for additional borrowing on your mortgage to afford to pay for your plans such as home improvements. 

5.     Debt Consolidation. When re-mortgaging, some lenders allow you to consolidate your debts to reduce your outgoings. 

 

Is a remortgage the same as a product transfer? 

A product transfer mortgage is a remortgage with your existing mortgage lender but involves switching to a new mortgage product. Product transfers are offered by lenders as a way to keep their clients rather than lose them to a different lender.

There are some restrictions with a Product transfer:

  1. You are restricted to the products offered by your lender only. There may be more competitive options by searching the market.
  2. The lender will complete a straight switch of your mortgage balance from one deal to another. You usually cannot make any amendments to the mortgage balance or term.
  3. If you have two or more parts to your mortgage, each sub-account will be on a different deal, this means you have different deal end dates for each mortgage and these are unlikely to align, until you remortgage.

 

Positives to a Product transfer:

  1. By arranging a product transfer, you do not need to be assessed again on the affordability for the mortgage as this was done when the mortgage was taken out with this lender, you will simply move across to a new mortgage product with this lender at the end of your current deal period.
  2. Process is much quicker then applying for a new mortgage with a new lender.
  3. No legal conveyancing fees to pay, as you are simply moving the balance from one deal to another with the same lender.
  4. If you require additional borrowing, Some lenders will allow a further advance when you complete a product transfer, This is affordability assessed to ensure the higher mortgage balance will be affordable to you.

 

What will it cost me to remortgage?

Costs for a remortgage can vary but it is important to consider the following costs which may apply.

  1. Broker fees. It is recommended to use the services of an independent and whole of market mortgage adviser for your remortgage advice. They may charge an upfront fee for the work they do in completing your remortgage application. This can vary but it is usually in the region of £495 for their advice fee.
  2. Lender fees. Some lenders may charge a product fee on the mortgage deal you wish to apply for. These can range from £295, to £1,495. It is important to discuss with your adviser your preference on upfront costs, as there are lenders who do not charge a product or application fee or may allow this to be added to the loan.
  3. Valuation fees. Most lenders offer a free valuation for a remortgage however if a valuation fee does apply this is usually payable upfront at application stage.
  4. Solicitor fees. A Solicitor will be required to complete the legal conveyancing for the Lenders charge to be secured against your property. Some lenders offer free legal conveyancing as an incentive for remortgage deals, so have a chat with your adviser about a ‘free legal’ mortgage deal if it is important for you to keep your upfront costs to a minimum.

 

If your mortgage deal is coming to an end, or you would like to make changes to your mortgage, please get in touch with one of our expert advisers today here 

Your home may be repossessed if you do not keep up with the repayments on your mortgage. 

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