Remortgage

There are many reasons why homeowners look into a remortgage. It could be that you have been paying a sky-high Standard Variable Rate (SVR) and want to remortgage onto a cheaper deal with the same lender.

It's also a possibility that you have been paying a competitive short or medium-term rate with your lender but, as it is drawing to a close, you want to remortgage onto something similar. Alternatively, you might want to remortgage to a different lender altogether as the best mortgage deal on the whole market lies elsewhere.

In any of these cases there are a number of factors you will need to consider before you remortgage. The most important one is if you are tied in to you current deal and it will cost you a hefty redemption penalty to leave. If you are not tied in and are free to remortgage with no penalty, there may still be an exit fee to pay - although after intervention from the Financial Services Authority (FSA), these have now come down in price and usually amount to no more than £200.

Even so, you could still incur remortgage costs from the new lender. Arrangement fees, for example are higher than ever and with a typical remortgage, there will be legal and valuation fees to pay too. Some lenders however offer specific remortgage products that don't charge any fees - just to lure new business from rival lenders.

But, depending on your circumstances, such as the size of your current mortgage and the interest rate you are paying, a remortgage could still make financial sense despite these costs. Basically you should remortgage when the saving you will make in interest repayments exceeds the cost of switching deals.

To make sure you remortgage to your best advantage, it is a good idea to use an Independent Financial Adviser or mortgage broker that is familiar with the remortgage market and can point you in the right direction in terms of cost, suitability and flexibility.

See also:

• Mortgage Calculators
• How to Remortgage

Last Updated: November 2007 © Moneyextra.com

MoneyExtra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.