Remortgaging Tips

You can save a lot of money by remortgaging for a better deal. The best deals involve a reduction in interest rates, and if you can negotiate a rate reduction, you can save a few hundred a year. That amounts to a great deal of money saved over the period of a mortgage.

However, if you get such a deal when you remortgage, the No.1 Tip is to keep paying the same amount, and you will pay off the mortgage sooner. Many remortgage deals are active for a limited time period, so whenever the deal expires consider remortgaging for a better deal - either even lower interest, or at least to maintain the interest rate you were on before the expiry date.

1. Examine Your Current Deal

The first thing you should do is examine the deal you currently have.

Do that around six months before your existing deal is due to end. If you don’t, then the likely outcome is that you will be transferred to your mortgage providers SVR (Standard Variable Rate) which will be around 2% higher than any of the deals out there. So, if you have a new deal already organize, you will be able to avoid having to be the SVR, even for a short period of time.

Not only that, but your lender might decide to offer you a new deal rather than losing your business. In order to achieve that you will have to find out what your existing lender’s SVR is and the outstanding amount on your mortgage loan. You then have the information needed to make a comparison with other mortgage lenders. You can get that from your last mortgage statement, or simply by telephoning your lender.

2. Check for any ERC

Also check up with them whether or not an ERC (Early Repayment Charge) will be applied, and how much it would be. These usually end at the same time as your tracker or discount deal ends, but it is best to make sure since some continue it afterwards.

If they do apply, find out for how long, and you might be best to wait until they will no longer apply since the charges can be high. However, it cannot be increased above the figure quoted in your contract, and if it is not in your contract, it cannot legally be applied at all.

3. Check for New Deals Available

As stated above, if you fail to switch in time you are liable to be put on your lender’s SVR at around 2% more.

Now, 2% doesn’t sound like a lot, but on a €150,000 mortgage it is €3,000 a year extra you will be paying. Using our comparison tables, you find out which Best Buys can save you most. Your LTV (loan to value) ratio will be relevant here. That is the amount of your existing mortgage as a percentage of the estimated value of your property – the lower the figure the better. A ratio of above 100% indicates that you are in negative equity.

Let’s say you have €100,000 left to pay on your mortgage, and the estimated value of your house is €200,000, then your LTV ratio is 50%. With an LTV ratio of under 60%, you should be able to get some of the best deals going. Even when you take a remortgage application fee of around €500 and the evaluation and legal fees into consideration, you should still find that remortgaging is financially better for you in the long run. You might even get the evaluation fee waved, and some even offer the legal processing free of charge.

4. Cost Comparison

Don’t sign up for the first deal that interests you.

Shop around and find the best you can, and then contact your existing lender and also the next cheapest in your list, and tell them what you are being offered - can they beat it to secure your business. Try to get them fighting each other with increasingly better deals till you are as low as any are prepared to go.

Make sure you are comparing like for like: get the mortgage amounts the same and the periods the same. Also make sure the type of mortgage you are comparing are the same - don't compare an interest only mortgage with a repayment mortgage, for example. Don’t compare a 25 year mortgage with one over 20 years - of course they will be different! Make sure everything is as level as it can be.

5. Do the Math

Once you have all the data you need, then you can calculate the costs of each offer with the savings. You can then work out how long it will take to pay the extra costs, and how much you will then save each month. Here is an example:

Let's say your current lender will charge you €400 ERC, and it will cost €600 to join lender B (valuation, legal, etc), your total cost to remortgage is €1,000. Let's also say that you are going to save €200 a month by switching. It will then take you 5 months (1000/200) to pay for the switch, after which you will be €200 a month better off.

If you are seeking a larger loan, the costs in remortgaging might not be much different, and you will save even more. However, sticking to the €200 after 5 months, some deals last for 5 years or more, and so it is a worthwhile switch to make. Six months before the deal is due to end, start the whole process over again. A couple of days work for a saving of €2,400 or more a year is well worth the effort.

However, if the deal last on 2 or 3 years, then it is less definite to be worth it, so try to get a 5 year deal agreed with the new lender. This is not as difficult as you might think, because they will be doing their best to prize you away from your existing mortgage provider.

There are also such things as 'portable mortgages' that allow you to transfer your mortgage agreement between properties. If you are planning to move houses over the short term, make sure that you get a portable mortgage, and so retain your deal when you move.

6. Time to Bargain

As previously suggested, mortgage lenders hate to have customers leave and will do a lot to keep them.

Once you have a definite offer from a mortgage lender go back to your original and let them know the situation. You might have done this earlier, but they might in turn be waiting for you. They might not make you a better offer than you have currently just on the threat to move, so present your case as a done deal.

They might either offer a lower interest rate or move you to one of their better deals. The advantage here is that an existing lender will frequently offer a cheaper deal without charging fees, so you start saving money immediately. You can then compare your new savings with that offered by the new lender.

7. Finally...

Having saved money, keep paying the same monthly amount as previously. That is how to make a saving work for you.

You will then pay your mortgage sooner, and the overall cost to you will be a lot less. You will be the proud outright owner of your home quicker, and also save a few thousand in interest.

These are the main advantages of remortgaging.