As mortgage deals become available with interest rates of below 1 per cent, remortgaging has the potential to save money for those currently paying much higher rates.
For the first time ever, interest rates on a five-year fixed rate deal have fallen below 1 per cent as lenders compete for business. This is believed to be the cheapest ever rate on a five-year fixed mortgage.
While a hefty deposit is needed and the arrangement fee is substantial, the new deal is a reminder that low rates are now widely available.
Finding a new deal
If you are considering remortgaging to take advantage of the competitive market, you need to take into account all of the costs and expenses when calculating whether it will be financially beneficial.
The first charge to look out for is any early repayment penalty that your existing lender may impose. They may also have an administration fee for dealing with the discharge of their charge.
Your new mortgage is likely to have an arrangement or product fee, which could be quite high. It may also be referred to as a booking fee or application fee. Some lenders may also charge a valuation fee for the cost of carrying out a valuation of your property before agreeing the mortgage.
Your solicitor will charge a fee for the legal work involved and there will also be associated costs including search fees and the Land Registry’s charge for registering the new mortgage.
If you use a broker, you may also need to pay them a fee, although some will not charge anything.
Once you have a total figure for the cost of moving to a new mortgage, you can compare it with the saving you are likely to make to see whether a lower rate is advantageous.
The legal process
If you decide to proceed, you will need to instruct a solicitor to deal with the legal aspects of switching to a new mortgage. By instructing them as soon as you decide to go ahead, you will be able to give their details to the new mortgage company so that they can send the offer straight to the solicitor as soon as it is available.
Your solicitor will obtain your title deeds from your existing lender and investigate the legal title to ensure that it is sound. They will also carry out the necessary searches which the lender will require.
Once the mortgage offer is received, the solicitor will go through this with you to ensure that you are happy with the terms and conditions. You will then sign the new mortgage deed, which will take effect on completion.
Your solicitor will obtain a mortgage redemption figure from your existing lender and order funds from the new lender to complete the transaction. On the day of completion, once the money has been received, your solicitor will pay off the old mortgage.
Your former lender will provide legal confirmation that their charge has been redeemed and your solicitor will send this to HM Land Registry, who will remove the previous mortgage from your title and add the new charge.
If you are thinking of remortgaging and you would like to speak to one of our expert property lawyers, ring us on 0333 305 5189 or email us at info@lpropertylawyers.co.uk
