Mortgage expert’s tips on tackling daunting prospect of remortgaging - including never accept the first offer
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A mortgage expert has shared her top five tips to tackle the “daunting prospect” of remortgaging as a repayment crisis looms. Fears have been raised about a “financial timebomb”, with more than 2.4 million deals ending in 2024 as homeowners face a significant jump in their repayments.
It means some homeowners are now exploring how they might refinance their mortgage. Felicity Holloway, who heads up mortgages at Moneybox Home-buying, has revealed how those impacted can navigate remortgaging with greater confidence.
What is remortgaging?
Remortgaging is when you move your mortgage on your existing property from one lender to another, meaning your new mortgage will then replace your old one. You may want to remortgage if you’re coming to the end of your existing mortgage rate or if you’re looking for a better deal than your current lender can offer.
Here are Felicity’s top five tips.
Preparation is key
“Just like when applying for a mortgage to buy a first home, homeowners needing to remortgage in the near future should make sure their financial records paint the best possible picture of their financial situation, to maximise chances of securing the best rate from a lender,” Felicity said. “Gather and review all supporting documentation in plenty of time including ID, wage slips, and bank statements, and triple-checking credit report details are up to date and accurate.
“Even though homeowners will have been making repayments on their mortgage for a number of years at this stage, a lot of factors can impact credit scores - it continues to play a big part in both your ability to remortgage and the rate you may get offered. For example, regular bills - including utilities or your phone bill - count towards credit scores, no matter how small.
“Make them all on time, and it will boost it up - but miss them, and it will fall. Homeowners will also need to ask their current lender for a redemption statement - this shows the amount left to repay, and how much you’ll need to borrow.
“It’ll also detail any early repayment charges or exit fees if homeowners are leaving their current deal early - so make sure these are factored into any decisions.”
“There is no doubt it can feel overwhelming for homeowners at times when it’s hard to turn on the news without hearing about interest rates and the impact of the rising cost of mortgages. However, it’s important to look beyond these headlines and don’t assume that the worst-case scenario will necessarily apply to you.
“All homeowners can get expert, free, and impartial advice from mortgage brokers and so shouldn’t be afraid to quiz them and get all their questions answered before they start a mortgage application. A broker will be able to assess your circumstances and let you know what is actually available to you in the market.”
Felicity pointed out it is also important to quiz any broker you may be thinking of working with on their processes and find out if they are ‘whole of the market’. She added: “Some mortgage brokers are tied to one lender or a small panel - which could result in missing out on a better one, so this is essential to know before appointing anyone.”
Never accept the first offer
Felicity reminded homeowners they should never take the first mortgage offer they receive - as there is often room for negotiation. She said: “Most homeowners will be contacted by their existing mortgage lender, six to nine months before a fixed deal ends, and be offered a new rate - a ‘Product Transfer’.
“While it might be tempting to just log on and sign up for this offer because the process is so simple, with rates being so high it’s important to do proper research to make sure that it’s the best deal available. A mortgage broker can do a comparison of the ‘Product Transfer’ rate you have been offered and advise you how it compares with the best rate and package that you’re likely to get elsewhere.
“Homeowners also shouldn’t don’t be afraid to ask their existing lenders to match what else is out there. They may have the flexibility to offer lower than advertised rates to their current customers.”
Secure an offer early but keep an eye on the changing rates
“Because the market is so volatile, there could be a temptation for those planning on remortgaging in the not-too-distant future to sit tight and hope rates fall. However, this is a very risky strategy and could see households end up on a Standard Variable Rate, which invariably, will result in much higher mortgage repayments.”
With that in mind, Felicity suggests securing a new deal in principle six months before the existing one ends - but still keeping an eye on interest rates. So, if a better deal does come along, and there’s enough time to get a new application submitted and processed, brokers will be able to handle this before the existing deal ends.
Trust the ‘stress test’
Felicity has also reassured homeowners that lenders work into affordability a “stress test” at the application stage to ensure mortgages remain affordable even if rates rise. She said: “So, for example, if someone took out a mortgage five years ago at two per cent, then the lender would have certified affordability to ensure that they could afford a much higher amount.
“Although it may be financially uncomfortable to pay out more after remortgaging, in theory, they should be able to afford it based on their income. A mortgage broker will also be able to advise if it is possible to reduce the cost of repayments by going interest only or extending the mortgage term, both of which can be adjusted in the future when there is less pressure on personal finances.”