• get a better rate on your current mortgage
• consolidate your debts and monthly outgoings
• release equity in your property
• move home

In happier financial times, remortgaging was a popular way to release equity in your property, say if you wanted to install a new kitchen or do expensive running repairs. Nowadays, however, when the financial climate is not quite so buoyant, any remortgaging should be based on need rather on the desire to accrue luxury fixtures and fittings. You should bear in mind, too, that if you leave your current mortgage earlier than planned there may well be financial penalties to pay, as well as any costs associated with your new mortgage. It will pay you in terms of time and worry to factor all these ‘unseen’ costs into your calculations.

How to Remortgage your Home

If you have decided to stay with your current mortgage lender the process should be relatively trouble free and clear-cut. Just before your mortgage term is due to expire you can expect to be contacted by your lender, who will discuss your options with you.

If you feel a bit intimidated by all this talk of interest rates, fixed rates and variable rates, however, take heart, you are not alone. If this applies to you we would urge you to contact a mortgage broker, who will be aware of products that aren’t necessarily available direct to borrowers. All UK mortgage brokers are answerable to the FSA (Financial Services Authority); this means you can be confident that you will be dealt with in accordance with the
FSA Code of Conduct. (This is a pdf file). To put it simply, the regulations of the FSA mean you can expect to be treated with fairness and honesty. You should bear in mind that most mortgage brokers charge for their services, another ‘unseen’ cost to factor into your calculations.

You could be forgiven for thinking that, if you already have a bad credit rating, the credit crunch has more or less eliminated any chances you may have had for remortgaging. Don’t despair, however, mortgages and re-mortgages are still available for people who have had credit problems in the past as well as those who have no proof of income, such as the self-employed.

It’s true that, if you have a poor credit record, including CCJs and bankruptcy, most High Street lenders probably won’t look at you twice but there are still specialist lenders out there who will approach your situation more sympathetically.

It has to be said up-front that you won’t be offered the best interest rates around as interest rates reflect how risky the lender thinks you might be – if you’re credit history is not wonderful or if you are looking for a high value loan compared to the value of the property, you will pay higher interest. Of particular importance is your very recent credit history, so you should have had no CCJs or additional mortgage arrears in the past three months.

When it comes to how much you can expect to borrow: up to about 90% mortgages are available for a fairly clean record; if there have been problems in the not-recent past, you could probably get 80% to 85%; and even those with very poor credit history can obtain a mortgage up to a maximum of 65% of the property valuation.

None of this is set in stone though and every case is different, which is why we always advise people in this situation to contact a registered mortgage broker. By approaching a specialist broker you:

• Could get a loan that you wouldn’t have been able to find by yourself
  
• Would only have to make one application only. This is important as multiple direct refused applications would further damage your credit rating
  
• Might be able to stay in your family home instead of being repossessed or evicted.
  

The following links may help you find the remortgage solution for you:

Credit Choices

Email Mortgages – this company offers free mortgage advice

Finance & Mortgage UK – specialise in what they call adverse mortgages

Cozy Loans – specialise in finding mortgages for those with a bad credit history

Moneysupermaket.com – offer a selection of lenders willing to loan to those with a poor credit profile

If you have used one these companies – or, in fact, any other loan or mortgage brokers – successfully or otherwise, why not help others in a similar situation by writing about it on our bank forum?

What Does Remortgage Mean?

In the simplest possible terms, when you remortgage you will move your mortgage from one lender to another one with the aim of getting a better deal. Remortgaging is big business, with around one-third of all home loans in the current market being for remortgages.

Why Should I Remortgage?

Anything that can reduce your outgoings has to be a good thing and by remortgaging your property at a better rate you could save yourself a fortune. For most of us, the money we pay to our mortgage lenders is our biggest monthly outgoing so, surely, it makes sense to take all possible steps to reduce it. You probably shop around for other household purchases like electrical goods and three-piece suites so why should your mortgage be any different?

There are a couple of other reasons to think about remortgaging too: moving up the property ladder could be just the opportunity to change lenders; your financial status might have undergone dramatic changes – an inheritance or large salary increase, for example; you are a victim of an endowment policy mortgage that isn’t going to make enough to pay your mortgage in full; you are overburdened with debts and would like to consolidate them all in your mortgage loan. It can be emphasized strongly enough, however, that that last option should only be used as a final resort – there are other, less risky, methods of debt consolidation.

Why Shouldn’t I Remortgage?

If shopping around proves that you already have the mortgage deal made in heaven – stay put! The converse is also true – if you have signed a mortgage contract that makes moving legally complex or expensive – or both – you’re also probably best advised to stay put. And finally, in the current market, if you need to borrow more than 75% of the property valuation of your home you are unlikely to find a lender.

What Difference has the Credit Crunch Made to the Mortgage Market?

The current low interest rates mean that if you’re on a Standard Variable Rate (SVR) mortgage you are probably better staying with your current lender, however, it is always wise to shop around.

Having been bitten in the behind by their shockingly free and easy ways with money, UK mortgage lending is now much more selective. Before any lender accepts you as a customer they will want to reassure themselves as to your credit-worthiness, so unless you have a spotless payment history, your chances of remortgaging your property aren’t as good as they would have been a couple of years ago.

You should be aware too that your current lender may well charge you an exit fee and your new lender may charge you a management fee too. Then there are the legal bills… Suffice it to say, whilst remortgaging may be the best move you ever make, it is a move that requires careful consideration first.

Making the Right Mortgage Choice

The right mortgage for you might not be the right mortgage for your neighbor – choosing the correct mortgage is all very dependent upon individual circumstances. The most basic of choices to be made is between an interest only mortgage and a repayment mortgage; probably the best advice is to choose for a repayment mortgage but this isn’t always the case. However, you will need to be a very astute risk-taker to make an interest only mortgage a good choice.

To be honest, there are far too many mortgage options available to discuss in one short article but there are myriad internet sites designed to help you make your choice. We strongly advise that you consult a licensed mortgage broker – one that covers the whole of the market and is not tied to a select group of lenders. And before agreeing anything, do find out what their fee is!

Making the Move

If you decide to do the work yourself – that is, without going through a broker – these are the basic steps to remortgaging your property:

1. Obtain a redemption code from your lender
   
2. Get quotes from the new lender
   
3. Don’t forget to add both sets of fees to arrive at the total cost
   
4. Work out how much you stand to save – then re-evaluate whether it’s worthwhile moving lenders or not
   
5. Apply to the new lender
   
6. Your house will be surveyed and valued just as with your initial mortgage. That plus the legal work should take about 6 weeks, but plan on it taking 8 weeks just in case
   

If you do decide to go through a broker, usually the most advisable route, you can expect to pay a fee of around 1.25% of the value of your property.

Mortgage companies lend money direct to borrowers. Unlike mortgage brokers, who arrange mortgages for householders from mortgage companies.

Most UK mortgage companies are banks and building societies. These businesses borrow money from each other, internationally, to lend to customers who want mortgages.

The worldwide credit squeeze has made banks and other financial institutions cautious about lending money to each other, in case they lose money through another sub-prime mortgage collapse. And they’re charging higher interest rates for the small amounts of inter-bank lending they’re prepared to do.

As a result, mortgages are in short supply and mortgage companies are less willing to lend.

Should I go direct to a mortgage lender?

Mortgages are scarce and many lenders have stopped giving mortgages to new customers. So going direct to mortgage companies might be hard work. In today’s economic climate you will probably have to contact several mortgage lenders before you find one prepared to offer you a deal.

Your own bank or building society is much more likely, these days, to offer you a mortgage than a financial institution that you don’t have any relationship with.

It might be wiser and will save you a  great deal of time and hassle to find yourself a reputable independent mortgage broker (link to Mortgage Broker page) who will search the entire mortgage company market to find the right deal for your circumstances

Advice about mortgage lenders

All reputable UK mortgage lenders are registered with the Financial Services Authority (FSA), which has strict rules and regulations and makes sure your consumer rights are protected. Never take out a mortgage loan with a UK mortgage provider that isn’t FSA regulated.

Find out more at:

For government advice including mortgage comparison tables updated daily: moneymadeclear.fsa.gov.uk

The Financial Services Authority: fsa.gov.uk

Top UK mortgage companies:
Here’s a list of the top ten UK mortgage lenders, from mortgageguide.co.uk June 2008:

•    The Halifax Building Society: Halifax.co.uk

•    Nationwide: nationwide.co.uk

•    Woolwich Building Society: woolwich.co.uk

•    Bradford and Bingley: bradford-bingley.co.uk

•    Abbey National: abbey.com

•    HSBC: hsbc.co.uk

•    Royal Bank of Scotland: rbs.co.uk

•    Lloyds TSB (including mortgages from partner mortgage company Cheltenham & Gloucester): lloydstsb.com

•    Alliance & Leicester: alliance-leicester.co.uk

•    Yorkshire Building Society: ybs.co.uk

•    Compare mortgage companies: MoneySupermarket.com

Please share your experiences about mortgage companies.

•    Word of mouth – ask your friends, family and colleagues.

•    Ask the current owner of the place you’re buying who gave them their mortgage.

•    Search your local newspapers for suitable adverts.

What happens once I’ve chosen a mortgage broker?

•    You work out together how much money you can borrow.

•    The broker will want details of your income and outgoings and credit history plus documents to prove the state of your finances; household bills, your passport, payslips and bank statements, your P60s.

•    Mortgage brokers will make sure your repayments are affordable and will get you the best possible fixed or variable interest rate for your circumstances and needs.

•    Your broker will guide you through the application form and submit it to the lender.

•    After the lender has checked your application, they might appoint a valuation expert to look at the place you want to buy. The valuer will make sure the property is worth what you’re paying for it.

•    If all is well, the lender will offer you a mortgage.

•    Your broker should keep you up to date with development right through the process, which can save you a lot of stress and hassle. They will also answer your questions and keep your application moving along smoothly.

Top UK independent mortgage brokers

There are plenty of good, household name independents to choose from, and many of them let you apply and get quotes conveniently online. Here’s a short list of reputable UK independent ‘whole of market’ mortgage brokers.

•    JohnCharcol.co.uk

•    Moneysupermarket.com/mortgages

•    BeatThatQuote.com/Mortgages

•    FirstMortgage.co.uk

•    TheMortgageOption.co.uk

•    Mortgages.co.uk/brokers

Useful mortgage broker advice and guidance

You’ll also find plenty of free specialist advice online. Try:

•    Guild of Independent Mortgage Advisers: Goima.co.uk

•    Moneysavingexpert.com

Mortgage brokers act as the middle men between you and the mortgage lending company, in much the same way as an insurance broker and with similar specialist market knowledge. A mortgage broker’s job is to find you the best possible deal for your personal circumstances, searching the market to uncover all your choices.

Despite the credit crunch there is still an enormous variety of deals, incentives, interest rates and payment terms out there. And finding the right deal can save you a small fortune.

UK mortgage brokers are regulated by the Financial Services Authority, so there are plenty of consumer safeguards in place. Visit the FSA website for details: fsa.gov.uk

Mortgage brokers don’t lend their own money to consumers. They negotiate loans with mortgage companies who lend the money.

Four kinds of mortgage broker

•    Tied mortgage brokers can only offer the products sold by one company. Although they have access to a very limited range of products, their deals can sometimes be very good. Brokers like this charge a percentage commission on the mortgage rather than taking a fee up front

•    Multi-tied brokers, mostly banks and building societies, have access to several lenders’ products. But the product range is still limited. Like tied brokers, multi-tied mortgage brokers usually charge a percentage commission on the mortgage rather than a fixed fee up front

•    Panel brokers are authorised to recommend products from a panel made up of a handful of specially chosen mortgage lenders. They usually charge a fee up front

•    Independent mortgage brokers cover the whole market. They are free to offer any product available, through any mortgage lender. Because of this, they’re the most likely to be impartial. Whole of market brokers like this will charge a set fee up front rather than take a percentage commission

Mortgage broker fees vary. So once you’ve decided which kind of broker suits you best, contact your shortlist and find the one with the lowest fees or commission levels.

When is the best time to contact a mortgage broker?

People do things differently. Some prefer to get the amount they can borrow settled before they begin house hunting, so that they can move fast once they find their dream home. Others prefer to wait until they’ve found somewhere to buy before approaching a broker.