SimplyFinance - Remortgage

Moving your Mortgage? Don't get Burned by Exit Fees

2010-03-17T00:00:00Z

There may be 50 ways to leave your lover, but there are only 2 ways to leave your mortgage; for free, or with a hefty penalty. Here is our guide to mortgage exit fees, and some tips for switching mortgage deals without paying over the odds.

There are two main types of fee for leaving a mortgage. The first is the Early Repayment Charge (also known as the Early Redemption Penalty). This is charged if you have taken out a mortgage that offered a lower introductory rate for a set period, such as a fixed rate mortgage, and you decide to move lenders or pay off your mortgage within that introductory period.

The reason for this is that a fixed rate mortgage, discount rate mortgage or similar is usually a loss leader for the lender. They tempt you in with a great deal and keep you there until they have made enough interest to make the deal worthwhile for them. It's the same principle as getting a really cheap deal on your mobile phone but being tied into that deal for 18-24 months.

The second type of fee, and the one we're focusing on here, is the mortgage exit fee, or Mortgage Exit Administration Fee (MEAF), to give it its full title. The mortgage exit fee only applies when you leave your mortgage deal after any introductory offers have come to an end.

How much are exit fees and what do they cover?

A mortgage exit fee can cost anything from £Â£50 to Â£500. The exit fee for your particular mortgage deal should be detailed in your mortgage agreement - this is just one of the many reasons why it's essential to read your mortgage contract in full before signing up.

The mortgage exit fee covers the administration costs to the lender when you move your contract, for example, releasing the deeds to your house, and changing the registration details at the Land Registry. In many cases, the fees charged far outweigh the actual cost to the lender of dealing with your mortgage move, which is estimated to be around Â£35-50.

What can I do if I feel my mortgage exit fee is unfair?

There have been cases in recent years where lenders charged higher exit fees to customers than the fees outlined in their original mortgage contract. In 2007 the Financial Services Authority (FSA) launched an investigation into the practice of increasing mortgage exit fees. They concluded that lenders needed to have a very good reason for doing so, but that in most usual cases, it was not justifiable to raise the mortgage exit fees above those stated in the original contract.

If you've tried moving your mortgage deal in the last six years and your exit fee appeared to have magically increased from the original amount, it is worth challenging your lender. We cannot guarantee that you'll be successful in getting the difference back again, since there is no actual law preventing lenders from doing this. However, many people have reclaimed the additional fee from their lenders and it is widely accepted that increasing mortgage exit fees is an unfair practice.

What happens when my introductory period is over?

After the initial period is up, you're usually free to move to a new mortgage product or even to a new lender if you find a better deal elsewhere, without incurring any exit fees. If you stay, you're likely to get moved onto the lender's Standard Variable Rate mortgage, a default interest rate that is hardly ever a good deal.

Therefore, it's highly recommended that you at least shop around when you're approaching the end of your deal, to see what's out there. At best, you can save yourself hundreds of pounds a month by remortgaging to a better deal, and at worst...you stay put and keep looking!

If you'd like some no-obligation advice and quotes, simply fill out our short remortgage form and you'll be contacted by an experienced mortgage adviser who will talk you through your options.

The Remortgage Process

2007-07-26T23:00:00Z

The remortgage process does not involve getting a second mortgage or moving to a different home. In essence, a remortgage is when you replace your original mortgage with another from a different lender in order to get low remortgage rate. Remortgaging is fairly simple, and it should not be any more complicated than it was to obtain your original mortgage, as long as your credit report is still good and you have a deposit totalling at least 25 per cent of the value of the property. The lender you choose will offer you remortgage advice, they'll go over your application, and they will ask you for necessary paperwork. The paperwork required usually includes proof of income, expenditures, and debts.

When you are looking to remortgage, often a home valuation needs to be done in order to determine if the value of your property has increased or decreased since you applied for your original mortgage. Your home?s value may have increased due to changing property markets, home improvements, or home additions. In most cases, the valuation for remortgage is less intensive than for an original mortgage. The surveyor will look at the outside of the house, and they will ask a few important questions. In some other cases, a full inspection will need to be made. Your lender may charge you a valuation fee to cover this expense. In addition, you may be charged legal fees and loan processing fees during the course of remortgaging.

Generally speaking, the remortgage process should take anywhere from four to six weeks to complete. Depending on the lender and the circumstances surrounding your specific loan and property, this time frame could be longer or shorter.

Once your paperwork has been reviewed and a credit check has been done, your remortgage broker will search the available remortgage packages to find the best remortgage rate for you. The remortgage rate you'll be given will be based on the amount of money you are asking for, the value of your home, and your credit score (which will depend on the lender you have applied to). Depending on the remortgage lender, there may be more factors taken into consideration, but generally speaking, these are the things that influence the remortgage rate you're offered.

If you'd like help finding the best remortgage rate and remortgage plan for you, take a minute to fill out out short questionnaire, and we will put you in touch with a broker from the SimplyFinance network who will help you to find the best deal for you,

Why this is the Best Time in Years to Remortgage

2010-06-10T23:00:00Z

Think back to April last year. We were in the midst of a worldwide recession, and the Council of Mortgage Lenders estimated that almost a million mortgage accounts were in negative equity. Mortgage adviser John Charcol estimated that a further 1.5 million only had equity totaling 15%. All things considered, only a quarter of all UK mortgage holders would have been in a position to remortgage last year.

Why the Standard Variable Rate worked for some

Sitting on a Standard Variable Rate (SVR) mortgage rate - the lender's 'default' interest rate - actually worked out quite well for some people. The SVR is usually set as a few percentage points above the Bank of England base rate. Due to the historically low base rate in recent years, many lenders' SVR rates were actually therefore lower than some of their new mortgage deals, and so 'sitting tight' was not a huge hardship.

The end of the SVR party

Now that situation is changing. Some lenders like Halifax and the Skipton Building Society were able to renegotiate their SVRs with their customers due to clauses in their terms and conditions, leading to higher rates (and some disgruntled customers). Other lenders, although they are contractually obliged to honour the lower SVR for existing mortgages, have introduced a new SVR for all new mortgage contracts.

Why now is a good time to Remortgage

According to figures from adviser John Charcol, 16 lenders have increased their Standard Variable Rate since the base rate fell to 0.5%, and 2 have increased their SVR in the last month. No lenders have cut their SVR in almost a year, and it's unlikely that any now will. Meanwhile, fixed rate mortgages are currently at their cheapest levels since 2003.

House prices are now back to within 9.1% of their original levels, according to Nationwide, and higher loan-to-value lending is now firmly back on the menu. As more good news, if you have been on your lender's SVR, you'll not have any early repayment charges to pay if you remortgage.

Should you be looking around?

If you have good credit and you don't need to self-certify your income, you could be in a good position to improve on your current mortgage deal. John Charcol estimates that in addition to the above criteria, if you are paying a standard variable rate of 3.5% or more, and you have a loan to value of up to 85%, there is likely to be a product in the market that will save you some money on your monthly repayments. If you can't prove your income or if you have adverse credit, you probably shouldn't consider moving at the moment, but it may still be worth talking to a mortgage adviser to discuss your options.

Request a callback from a remortgage adviser today.

Types of Remortgages

2007-08-15T23:00:00Z

Before we dive into explaining the various types of remortgage loans, it's important to understand the basics of what a remortgage is. A remortgage is a type of transaction where the homeowner chooses to switch mortgage lenders, but they will stay in the same property as in the first mortgage. People opt to remortgage when they want to save on repayments or if they want to raise capital. Those who have gone through a new mortgage application may find that the application for remortgage is remarkably similar, yet slightly more simple and less time-consuming.

Types of Remortgages

Remortgages generally fall into three categories: fixed rate, discounted rate, and variable rate. With a fixed rate, your payments will be set for a certain length of time. During this period, your payment rate will not fluctuate up or down, but it will stay at the same level. Once the predetermined fixed-rate period is over, the loan will then adopt a variable rate. A discounted rate remortgage is like a variable rate mortgage, but it differs in that the lender offers you a discount on your interest rate. Thus, your payments will be reduced for a certain length of time, but your payments are still influenced by the fluctuations in interest rates. A discounted rate remortgage becomes a variable rate remortgage once the discounted period is over.

A variable rate remortgage makes it fairly difficult to predict what your monthly payments will be since the interest rate fluctuations will determine the amount you have to pay each month.

Benefits of Each Type of Remortgage

A fixed rate remortgage is good because the fixed rate protects you from any upward fluctuations of the interest rate. However, do not expect to be benefited if the interest rate goes down. This type of remortgage is apt for thrifty borrowers who plan loan payments carefully. Such borrowers want the security from interest rate fluctuations that a fixed rate remortgage guarantees.

A discounted rate remortgage is advantageous for those who appreciate lower initial payments, and for those who want to pay lower interest rates when the interest rate decreases. Bear in mind that when you possess this type of remortgage, your payments go up as interest rates go up.

A variable rate remortgage generally benefits people who want their payments to go down when interest rates fluctuate downwards, but are willing to pay more when interest rates go up. A variable rate remortgage borrower does not want to be tied into a fixed interest rate in the case that the base rate decreases.One thing you have to remember, regardless of which of the type of remortgages you choose, is that there will be fees for a new survey of your home to determine the value. In addition, there will be arrangement fees, broker fees, legal fees, etc. to deal with.

Types of Remortgage Borrowers

Just like there are different types of remortgage loans, there are also different types of borrowers (good and bad credit borrowers). A good credit borrower is someone who can guarantee that he can shoulder the payments for any of the three types of remortgages. Cautious lenders may limit their market to this type of borrower.

On the other hand, the more daring remortgage lenders may opt to issue any of the three types of remortgages to people with poor credit ratings or bad credit history. Bad credit remortgage lenders will know whether you have poor or negative credit because all lenders conduct a credit check on UK borrowers. They will be looking for evidence of defaults, IVAs, debts, bankruptcy, the credit history proper, mortgage arrears, defaults and CCJs. A negative credit rating could result from factors that are out of your control, such as a divorce, a severe illness, an accident that left you unable to work, and other such things. In such cases, the lender may be willing to accommodate your application and give you a bad credit remortgage. It is important that you provide all the information needed by the lender so that your remortgage application will be considered with care.

It is necessary to get remortgage advice before you choose a loan for your situation, advice such as that given here about the types of remortgages available. You should know that a remortgage is not final. You may switch to other types of remortgages if you decide that a different type of loan will be more financially advantageous. So get to know the types of remortgages in greater detail before you sign on the dotted line.

If you'd like help finding the best fixed rate remortgage, variable rate remortgage, discounted rate mortgage, or bad credit remortgage, take a moment to fill out our short remortgage form, and an adviser from the SimplyFinance network will get in touch to help you on your way to finding the best remortgage deal for you.

Lower Fees Demanded in the Face of Declining Mortgage Approval Numbers

2008-06-26T23:00:00Z

On Tuesday, the British Bankers Association reported that home mortgage loan approvals declined from 34,752 in April to 27,968 in May. This May's number is 56.1 per cent lower than the same time last year, and it's the lowest number of mortgage approvals since 1997, when the BBA started collecting data on the topic. This upcoming Tuesday, the Bank of England is releasing their report on the topic of mortgage approvals, and the numbers are expected to be even lower due to the wider range of lenders that are surveyed by the BoE. Their data currently shows that the number of approvals has been halved since the end of 2006.

Economist Michael Hume of Lehman Brothers said, "A US-style housing slump looks increasingly likely." He added that the housing market was, "rapidly grinding to a halt under the pressure of higher mortgage interest rates, tighter bank lending standards, and declining confidence."

Despite all the financial turmoil in the housing market, experts believe that policy makers will hold off taking action until there is a severe negative impact on consumer spending. A negative impact of the housing market is starting to be seen in by the credit card industry. During the 18 months prior to May 2008, the amount of credit card payments being made by consumers topped the amount being charged to the cards. However, as of May, net credit card spending had risen to £550million, a drastic increase over previous months. This increase has led experts to conclude that consumers are really starting to feel the burden of a higher cost of living.

Prompted by the latest data on mortgage approvals, and in an effort to ease the burden on mortgage borrowers, Chancellor Alister Darling has requested that banks scale back their arrangement fees, which have been seen in amounts of up to £3000. Darling said that if banks don't comply with his request, he will ask the Financial Services Authority (FSA) to step in and take action. He feels that home loan borrowers are being taken advantage of by banks, especially those borrowers that are remortgaging after the fixed term of their previous mortgage had expired.

The Council of Mortgage Lenders (CML) said that lenders require high arrangement fees on loans with low interest rates and vice versa, so technically, it's up to the borrower when it comes to the amount of fees they pay.

What does this mean to you, the borrower or the potential borrower? It means that you need to have your budget in mind before you go in to secure a mortgage or a remortgage loan. Know exactly how much you can afford to repay each month, including fees. This way, you will have a solid number in mind, and you'll be less likely to be swayed by lenders, and you'll be less likely to find yourself tied into a mortgage loan that you can't afford.

Considering the higher difficulty in securing a mortgage, your credit needs to be as good as possible before you try to find the right mortgage loan. Keep an eye on your credit report (get a free trial subscription with Experian here), and be sure that there are no mistakes on your report that could lessen your credit score. Mistakes aren't uncommon, so it's a good idea to keep tabs on your credit report.

The mortgage market doesn't look good, but it's not impossible to find the right mortgage loan for you. Do your research, keep an eye on your credit, and know your financial limits.