Remortgaging your home can be a smart financial decision, whether you’re looking for a better deal, releasing equity, or consolidating debt. However, there are some key mistakes you should avoid when remortgaging. By understanding what not to do, you can ensure a smoother process and potentially save money in the long run. Here’s a list of things to avoid when remortgaging in the UK.
1. Don’t Apply for New Credit
One of the most important things to avoid when remortgaging is applying for new credit, such as loans, credit cards, or finance deals. Lenders assess your affordability based on your current financial commitments. Taking on new debt during the remortgaging process can lower your credit score and make you look riskier to potential lenders. Even if you’re approved, this new debt could impact the amount you can borrow or the interest rate you’re offered.
2. Don’t Miss Payments
Another critical thing to avoid is missing any mortgage payments, or payments on other financial commitments, in the run-up to remortgaging. Lenders look closely at your payment history to assess your reliability as a borrower. Missed or late payments can signal financial difficulty and reduce your chances of securing a favourable remortgage deal. Make sure all your payments are up to date for the best possible outcome.
3. Don’t Ignore Early Repayment Charges
If you’re planning to remortgage before your current mortgage deal ends, watch out for early repayment charges (ERCs). These fees are typically applied if you leave your mortgage early, and they can be substantial. Check with your lender to understand if you’re liable for any ERCs and factor this cost into your decision-making process. In some cases, waiting until your current deal ends can save you money.
4. Don’t Overestimate Your Property’s Value
When remortgaging, your lender will likely require a property valuation to determine how much equity you hold in your home. Overestimating your property’s value could result in a lower loan-to-value (LTV) ratio than expected, which could affect your ability to secure a competitive rate. Be realistic about your home’s value and consider getting an independent valuation if necessary.
5. Don’t Forget About Fees
Remortgaging comes with costs, including arrangement fees, valuation fees, legal fees, and possibly early repayment charges. Forgetting to factor in these fees could mean that remortgaging isn’t as cost-effective as you first thought. Always do the math and ensure that any savings from a lower interest rate outweigh the costs involved in switching deals.
6. Don’t Be Hasty in Choosing a Lender
While it can be tempting to jump at the first deal that offers a lower rate, it’s important not to rush into a new mortgage. Not all mortgages are created equal. Take the time to compare different products, including fixed, variable, and tracker rate mortgages. Also, remember that the lowest rate doesn’t always mean the best deal. Additional fees, flexibility in overpayments, and other terms can make a big difference. Using a mortgage broker can help you navigate the options and find the most suitable deal for your situation.
7. Don’t Forget to Check Your Credit Report
Before remortgaging, you should always check your credit report to ensure it is accurate and up to date. Lenders will examine your credit score when considering your application. Any mistakes or inaccuracies on your report could impact your chances of getting approved or securing a favourable deal. If you spot any issues, get them corrected before you apply.
8. Don’t Overstretch Yourself Financially
Just because you can borrow more doesn’t mean you should. When remortgaging, some homeowners are tempted to release equity for home improvements, paying off debt, or other purposes. However, it’s essential to ensure that taking on a larger mortgage won’t overburden your finances. Consider your future plans, job security, and potential interest rate increases before committing to a higher loan amount.
9. Don’t Skip Getting Professional Advice
Remortgaging can be complex, especially with so many products and options available. It’s always advisable to seek expert advice, whether from a mortgage broker near you or financial adviser. They can help you find the best deals based on your individual circumstances and ensure you avoid costly mistakes. Brokers also have access to exclusive deals that may not be available directly from lenders.
10. Don’t Delay If Your Current Deal Is Ending
If your current mortgage deal is coming to an end, don’t leave it too late to start the remortgaging process. If you don’t secure a new deal in time, your mortgage may revert to the lender’s standard variable rate (SVR), which is usually higher than other products. Ideally, start shopping for a remortgage about 3-6 months before your current deal expires to give yourself plenty of time to find the right deal.
Conclusion
Remortgaging can be a great way to save money or access funds, but only if done correctly. Avoiding the mistakes listed above will help you navigate the process smoothly and ensure you get the best possible deal. If you’re unsure, always seek advice from a local mortgage broker to guide you through the process.
