Wesleyan Financial Services Consultant, Bal Thandi, shares her key considerations for getting the best deal when it comes to re-mortgaging your property…
Advice about obtaining a mortgage is widely available, but what happens when you have a mortgage, and the time comes to renew or change it?
Something I see all too often as a financial consultant is dental clients coming to me after sticking to their existing mortgage lender because they felt trapped – mainly by the extra work involved. As a busy practitioner, this area of financial planning just doesn’t feel feasible to dedicate much time to, especially when the existing deal is affordable.
However, the benefit of re-mortgaging your property – and taking the time to do this properly – is worth the effort if the end result is more money in your pocket through reduced rates and monthly payments.
To save you valuable time, I’ve pulled together my top considerations for navigating this area of financial planning to help you achieve the best deal.
Plan in advance
It’s best to start planning six months in advance of when you need to re-mortgage. You need to make sure:
- Your bank account is as healthy as it can be
- Your borrowings are paid on time and your payment history looks good
- You have an up-to-date budget planner so that you can discuss your mortgage options and affordability when the time comes
You’ll also need to find out if your lender will offer you preferential rates as an existing borrower a month beforehand.
Ideally, the application for your preferred mortgage offer should be completed a couple of months in advance, so that you don’t end up paying more as market rates begin to rise. You should also ensure you have the mortgage redemption figures a month beforehand so that the most attractive lender can be sought.
What is the loan-to-value (LTV) ratio?
Your LTV ratio is an assessment of lending risk that mortgage lenders will look at before approving an application. The bigger the equity (the amount you have paid off your mortgage against the property’s overall value), the more attractive the rates are.
Remember, it’s not just about mortgage repayments. Have you considered other outgoings that may impact monthly affordability when it comes to choosing the term of mortgage? These outgoings may include council tax, service charges and ground rent.
It may be the case that when re-mortgaging, you release some equity to help with other big expenses such as home improvements.
What are your future plans?
You need to consider your future goals in relation to what you plan to do with the property. This should determine the amount of time you fix any mortgage product.
Your provider may require an early repayment charge (ERC) when you pay more than the agreed amount (or pay the mortgage off entirely) too early. If you think you may want to sell in a certain timeframe, you can look for a fixed term mortgage that suits your circumstances.
Keep associated costs in mind
Remember that there are associated costs with re-mortgaging your property with another lender. Factor in fees such as legal fees, stamp duty (where applicable) and insurance costs when weighing up whether it makes financial sense to make the move.
It may be the case that your existing lender may offer you a better rate. Some lenders do offer preferential rates for existing borrowers, so check this first before committing.
Seek specialist advice
It would be understandable to assume that choosing a new mortgage is as simple as choosing one with the lowest rate, but this isn’t necessarily the case.
To achieve the best savings in the short, medium and long term, you may want to speak to a financial consultant or mortgage broker who fully understands your circumstances.
If you would like to get specialist one-to-one mortgage advice from a Wesleyan Financial Services Consultant, you can book an appointment here.
Your mortgage is secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.