What the heck are REMORTGAGES??

Depending on how long your mortgage deal lasts, it is fairly likely that there will come a time when you will need to remortgage to a different deal to avoid higher repayments on your lender's standard variable rate (SVR).

But remortgaging is not a straightforward swap. There are usually fees involved and your loan will be subject to a new property valuation. Follow our guide to make the process as pain-free as possible.

Think ahead

It is possible to book a mortgage rate with a lender up to six months in advance. This can be useful if you think that interest rates are likely to rise by the time you come to remortgage, or if the mortgage market looks volatile. Otherwise, brokers recommend that borrowers allow six to eight weeks to secure a new loan before the old one expires.

Research the market

Finding the best rates requires a three-pronged attack. Ideally, you should ask a broker, as well as approaching two or three lenders directly and using price comparison websites, such as Moneyfacts.co.uk and Moneysupermarket.com. There are also a number of online mortgage brokers, such as mform.co.uk.

Reduce your loan size

If you have a mortgage worth more than 75 per cent of your property's value, you will miss out on the best rates. However, the lower the proportion you owe, the better the rate you can secure. At the end of the current deal it is worth using any spare savings to pay off some of the loan. This will improve your chances of finding a competitive rate. Alternatively, most lenders will allow you to pay off an extra 10 per cent a month.

Choose wisely

Your circumstances may have changed since the last time you took out a mortgage, so it is important to reassess what type of loan you need. For instance, if you were previously on a tracker rate but your budget is now being squeezed, you may be better off taking a fixed rate this time around. Or if you are planning to move soon, you may prefer to take out a shorter-term deal. Anyone who has managed to build up some savings could benefit from an offset loan, which reduces the interest you pay on the mortgage, thus decreasing your mortgage term.

Don't waste time

Waiting until you are already paying your lender's SVR can be a costly mistake.

The SVR is the default mortgage rate that lenders charge all borrowers when they come to the end of a lower-rate deal. It is usually much higher than the rates on deals, so even though you may have to pay a fee to remortgage, it is almost always cheaper over time to pay the fee than remain on the SVR.

The average SVR is currently 7.11 per cent, about 1 percentage point higher than average fixed-rate deals. On a £150,000 loan, repayments on an SVR would cost an extra £94 a month.

Be decisive

Depending on market conditions, you can have anything between a few weeks or a few seconds to decide whether to take a deal. This is because lenders first offer you a decision in principle. This is not a binding offer - the lender is committed to lending the money only after it receives your application and makes a formal offer.

Sometimes demand can be so high that a lender is able to offer a deal in the morning, only to withdraw it in the afternoon and replace it with a higher rate. This is where having a broker, who usually has a relationship with lenders, can come in handy.

Mortgage offers come with expiry dates, too, so check when it runs out because delays could mean that you have to go through the whole application process again a few months later.

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