Step by Step Guides Remortgaging

Looking for a better deal or to release some equity on your already mortgaged property? This guide lists everything you should know about the remortgaging process.

Sections:

1. Why Remortgage?
2. Current Mortgage
3. Select Mortgage
4. Current Details
5. Calculations and Timeframe
6. Check Penalties
7. Improvements
8. Survey, Complete

6. Check Penalties

Early redemption charges
Early redemption charges are levied if you repay your loan in a certain period.

If you have an existing fixed, capped or discounted rate mortgage, or if you received a substantial cash-back amount when you took your current mortgage, there's a real chance that an early redemption charge will be applied to your loan.

They're designed to help the lender recoup the costs of setting up the deal.

Usually, the charge is a percentage of the loan you are repaying, or a number of months' interest. Most charges are payable only during the special offer period, but in some cases they're levied beyond that - these are called overhanging redemption charges.

In some cases it may be worth paying this fee - for example, if you have several years left on a very high fixed rate after the initial deal has ended.

Remember, it may make sense to wait until the redemption charge period has passed before you switch your home loan. Often, though, it's worth sitting tight until you can walk away from the deal without paying hundreds of pounds for the privilege.

Ask your lender for a redemption statement outlining the outstanding mortgage balance and how much you need to pay in charges.

On top of redemption fees, most lenders charge a sealing fee and/or a fee for releasing the deeds, which can add up to around another £100.

If you had cash-back, then you will be expected to pay some, if not all, of the money you received if you move your mortgage elsewhere.

New Penalties
When selecting a new mortgage with a low interest rate, keep in mind that the price you may have to pay in the future for the lender's initial generosity could be high early redemption charges applied to the new loan.

Some lenders don't charge any redemption penalties at all, even on fixed and discounted rate home loans, so make sure you get enough quotes to compare.

You can always choose to stay with your new lender indefinitely and never pay redemption charges. However, ask yourself whether you will really stick with the new lender for the remainder of the life of your mortgage.

Loss of benefits
For those who took out a mortgage before 2nd Oct 1995, the state income support to qualify borrowers kicks in after eight weeks of claiming and is worth 50% of the interest for the next 18 weeks and 100% after that date. If you took out your current mortgage before October 1995, you should qualify for much more generous help with your mortgage payments from the state should you become unable to work.

For mortgages taken out after 2nd Oct 1995 the borrower gets no help with interest payments for the first nine months of making a claim.

A borrower whose existing mortgage arrangements predates October 1995 risks losing their right to the more generous state income support terms if they remortgage for a larger loan from a new lender.

return to mortgage guides | next page

• Remortgage Specialists

  A mortgage brokerage providing excellent home loan solutions for people with poor credit. Specialists in remortgages for people with bad credit.

  http://www.findthatmortgage.co.uk

• Bad Credit Mortgage Brokers

  We specialise in bad credit mortgages and remortgages for people with an imperfect credit history.

  http://www.findthatmortgage.co.uk

• Mortgages for the self employed

  For too long the self employed, contractors and freelancers who are paid by way of bonus or commissions have been discriminated against by mortgage lenders.

  http://www.selfcertmortgageuk.co.uk