Guide to remortgaging July 2015
Guide to remortgaging Remortgaging is where you move your mortgage from one lender to another by paying off the original mortgage with the proceeds of the new one, using the same property as security. If you are with another lender and are looking to remortgage for a better deal, we have a range of mortgages that could save you money. This handy guide will take you through the pros and cons and the steps involved when applying for a remortgage. Why remortgage? There are four main reasons for remortgaging: To reduce your monthly repayments by securing a cheaper mortgage To release some of the value in your property for other spending such as home improvements or paying off debts To reduce monthly repayments by extending the term of your mortgage, which will mean it takes longer to pay off the loan and could increase the total cost of your mortgage To reduce the mortgage term by finding a cheaper deal and keeping repayments the same, you could be mortgage-free sooner. it s worthwhile reviewing your mortgage regularly
Things to consider If you are nearing the end of your current deal or paying the standard variable rate, it s a good time to start thinking about remortgaging. You should start thinking about remortgaging three to six months before your current deal ends. However, it s worthwhile reviewing your mortgage regularly anyway to ensure it continues to best suit your needs. You can switch your mortgage at any time, but be aware that you may have to pay Early Repayment Charges (ERCs) if you are still within the term of a specific mortgage deal. It is vital that you compare your current deal with any you might consider switching to and look beyond the headline interest rate Be aware of fees and charges involved. Before you start shopping around, speak to your existing lender to see if they can offer you a better deal. It may be simpler and cheaper to switch products with your existing lender at the Melton, for example, existing customers who switch to another product with us do not pay product fees. 1
How much will it cost? The good news is there s no Stamp Duty to pay. However, there may be a number of costs involved, including: Product fees these could be application and completion fees which will be a set charge or percentage of the loan amount. Some product fees can be added to the mortgage, others are payable when you make your mortgage application. Legal fees these fees will pay for a solicitor to cover conveyancing, surveys, arranging completion dates and the transfer of funds. Lenders, such as the Melton, offer some products with no legal fees. Valuation fees you will also have to pay for a valuation of your property before your potential new mortgage provider will approve your application Broker fees if you use the services of a broker fees may be charged Early repayment charge if you pay off your mortgage early, when it is still within a specified mortgage deal. 2
make sure you are comparing like for like How do I find the right deal? Ask your current lender for a redemption quote (there may be a charge for this, so alternatively use your last mortgage statement) This will explain how much it would cost for you to pay off your mortgage, including any fees and charges that may apply. You will need to be able to borrow this amount from a new provider before being able to switch. Shop around for the best deals Decide on the type of product you would like for example, fixed rate, tracker or variable rate. Speak to lenders directly and use comparison websites. If you don t want to do the legwork yourself, you could use a mortgage broker although a fee may be payable. When comparing mortgages, make sure you are comparing like for like: Repayment (capital and interest) or interest only The type of loan The term of the loan The period of the special rate Maximum loan to value ratio (LTV) Fees and charges Flexibility How interest is calculated Additional features or conditions But remember it s not all just about the rate, smaller lenders, such as the Melton provide a personal service with manual underwriting. You can speak to us on the phone, online or face to face in one of our branches. 3
Start the application process The process for applying for a remortgage is similar to applying for a new mortgage except that hopefully it should be easier as you have done it before! The first step is to get a Key Facts Illustration (KFI) for any mortgages you are interested in. This gives you all the information you need to know about the product and is standardised so that you can compare mortgages from different lenders on a like for like basis. If you are happy, you will then need to get a Decision in Principle from your chosen lender which means they are prepared to lend you the mortgage you have asked for, based on the information you have provided. You are then in a position to complete a full mortgage application. Get your paperwork together You will need: Proof of your ID passport or driving licence and National Insurance number Proof of your address for up to 5 years utility or council tax bills Proof of your employment P60/payslips/accounts Proof of your financial situation income, outgoings and assets (eg. bank statements) Proof of your current mortgage mortgage statement and redemption statement from your current lender. 4
there is less legal work involved in remortgaging Valuation Your home will have to be revalued. This usually involves your lender organising for a surveyor to visit, however, some lenders will simply undertake a desk top assessment or drive by valuation which doesn t require a visit, but may still incur a fee. Legal work A solicitor or conveyancer is needed to carry out the legal work. Either your lender will instruct one or if you wish to use your own, they usually insist that they are on their approved list. There is less legal work involved in remortgaging than when you buy a house and some lenders, such as the Melton, offer fees assisted legal work on some products. 5 Insurance You should already have insurance in place to protect your home. However, if you remortgage it s a good time to review your cover, especially if the valuation indicates your property has increased in value. If you are borrowing extra money for home renovations or an extension, remember to make sure you have sufficient cover for both the buildings and contents of your new improved home. It s also a good time to review your future financial goals and plans for you and your family. The Melton works with carefully selected financial services providers to enable us to offer independent expert advice on financial planning, estate planning and insurance.
Budgeting Use our handy budget sheet to stay on top of your finances. Income In Net salary/earnings Benefits/maintenance Other income Partner s income Total Income Amount Notes Personal Costs Out Food and drink Travel (public transport) Car (fuel, insurance, tax) Insurance (home, travel, life etc) Childcare costs/maintenance Clothes Tobacco Household necessities Mobile Phones Entertainment Clubs memberships Credit card payments/loans Leisure and recreation, sports, hobbies, holidays Gambling/lottery Petcare costs eg pet insurance,vet bills Other outgoings Total Personal Costs Out 6
Home Costs Out Mortgage Council Tax Building and contents insurance Mortgage protection plan Service and maintenance charges Landline telephone and internet Utility bills, e.g. Gas, Water, Electricity) TV licence TV satellite/cable costs Total Home Costs Out Amount Notes Now add up your personal and home costs and take the total away from your income, then you should know how well you are doing. Remember a good budget allows for saving, some luxuries and an amount for emergencies such as repairs and maintenance. Total Income Deduct Total Costs = Disposable income Amount Notes 7
Frequently Asked Questions 1. Can I remortgage more than once? In theory you can remortgage as often as you like. However, you do need to consider the fees and charges and calculate whether it is worthwhile. 2. Will remortgaging affect my credit rating? Each application you make for any type of credit is shown on your credit file. The more applications you make, especially if they are unsuccessful ones, the less likely it is that your next one will be accepted because it may affect your credit rating. All lenders will tell you if and when they check your credit rating. 3. What information is needed if I am selfemployed? Most lenders will require you to provide them with a minimum of 1 year and up to three years audited accounts, or proof of income from the 8 8 Inland Revenue. If you cannot provide these, the lender will want to know why. If you are newly self-employed, consider using a specialist broker, as it may be difficult to get a deal, particularly at the rate you want. 4. My mortgage loan amount is very low, is remortgaging still worthwhile? You will need to weigh up the costs (charges and fees) against the savings you will make in reduced payments, over the term of your loan. If you only have a small mortgage, you might be better off sticking with your current lender. the best remortgage deals are usually those with the lowest loanto-value
5. Can I remortgage to free up money for home improvements? Providing you re in a position to borrow extra money when you remortgage, subject to status and affordability, you can do so for this reason. Many people do borrow more for home improvements when they remortgage and the added benefit is that you will probably increase the value of your home in the long term. 6. When I remortgage can I change to a repayment? (capital and interest) Yes you can as you are starting a completely new mortgage. This would be an excellent time to reassess your financial situation and opt for a repayment mortgage giving you the peace of mind that you are paying off the capital as you go. Some lenders, such as the Melton, may allow you to split your mortgage, so a part is on an interest only basis and part is on a repayment (capital and interest) basis. 7. What if the value of my home has changed? If your home has increased in value during the period of your mortgage, you may be able to borrow more by releasing equity from your property for home improvements, to make a large purchase or consolidate debt, for example. Remember though that the best remortgage deals are usually those with the lowest loan-to-value ratio so bear this in mind if you re considering borrowing a higher percentage of your property s current value. 9
A Mortgage with the Melton A mortgage advisor will chat through with you: Value/purchase price of your property How much you are looking to borrow Run through our affordability calculator Give you a brief overview of products that may be suitable for you If you decide to enquire about mortgages with the Melton, we can review your mortgage requirements in just 15 minutes. You can then decide whether you would like to book a mortgage appointment to make a mortgage application. 10
The mortgage application If you decide you would like to make a mortgage application with the Melton, you will need to make an appointment with one of our mortgage advisors. You can make your mortgage application either over the telephone or in branch, please allow approximately 1 hour 15 minutes for this. During this appointment we will complete a fact find and affordability assessment. To assist us in completing this efficiently and to enable us to provide you with a Decision in Principle, it would be helpful if you could have the following information available: Address history details of your residential address for at least the last 5 years. If self employed, your last 3 years accounts details of your net profits and/or salary and dividends. Details of any other income such as pension income, rental income etc that you may receive. Details of existing mortgage payments Your last 3 months bank statements we will ask for details of your regular outgoings/expenditure. Details of your financial commitments any loans, credit cards or other financial commitments you may have. Protection policies details of any income protection and life policies. If employed, your last 3 months payslips details of your earnings and any deductions made from your salary. THINK CAREFULLY BEFORE SECURING OTHER DEBTS ON YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE 11
The Melton Building Society is a modern, national provider of mortgages and savings, with branches in Melton Mowbray in Leicestershire, Oakham in Rutland and Grantham in Lincolnshire. The Society has been helping people to buy homes and make the most of their savings since 1875 and regularly features in national best buy tables. Good luck don t forget if you need any assistance, we are here to help, please call the Melton on: 01664 414141 or visit www.themelton.co.uk 12
The Melton s Mission Statement: To be a trusted national provider of savings and mortgage products, with a reputation for meeting niche customer requirements, whilst having the freedom to reward our members by delivering a strong business performance. 5 values which help us put this into practice: Integrity we always strive to keep our promises and act responsibly to inspire trust and confidence Openness we are honest and straightforward and we are always open to new ideas Respect we always acknowledge, support and recognise individual choice Learning we constantly strive to improve and learn from our mistakes and the experiences of others Teamwork we always help each other to achieve our full potential and work together to keep the customer experience at the heart of all we do For our customers this will mean we really are 13
Principal Office Mutual House, Leicester Road, Melton Mowbray, Leicestershire, LE13 0DB. Tel: 01664 414141 Fax: 01664 414040 E-mail: melton@mmbs.co.uk Branch Offices 18 Nottingham Street, Melton Mowbray, Leicestershire, LE13 1NW. Tel: 01664 480214 Fax: 01664 560321 E-mail: meltonbranch@mmbs.co.uk 48 High Street, Grantham, Lincs, NG31 6NE. Tel: 01476 564528 Fax: 01476 575231 E-mail: grantham@mmbs.co.uk 23 High Street, Oakham, Rutland, LE15 6AH. Tel: 01572 757911 Fax: 01572 757946 E-mail: oakham@mmbs.co.uk Opening Hours: 9.00 am - 6.00 pm Monday to Friday 9.00 am - 12 noon Saturday www.themelton.co.uk The Melton Mowbray Building Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. MMBS28715