Steps to Remortgaging
There are many reasons why you may need to remortgage your home and even with the best reasons you may be putting off this decision. For many the thought of remortgaging one’s home seems like a daunting task; one that is best avoided at all costs. However, choosing to ignore the problem and try to deal with one’s current mortgage can be a costly mistake and the reality is while going through the process of a remortgage may seem daunting it is not nearly as bad as paying more than you should on your current mortgage for years to come. The truth is going through a remortgage is actually an easy process; especially considering the following steps:
Step One: Research
One of the most critical steps in remortgaging is research. Research what, you may ask. There are two pieces of preliminary research that must be done before jumping into the process of a remortgage. First of all, researching interest rates that are currently available from banks across the UK will give you an idea whether you are able to actually save money. There are plenty of financial calculators available out there that can give you an idea of what to expect in terms of what your monthly mortgage payment will change to with the remortgage as well as what to expect the closing costs will be.
One critical calculation to do is to determine how long it will take to recoup the closing costs with the mortgage payment’s change. It is an easy calculation: take the difference between your current payment and what you will be paying and divide it into the closing costs. The resulting number is the number of months that it takes to recover the closing costs. If this is going to take more than a year or two, you should consider holding off on the remortgage.
The second bit of preliminary research to do is to try to independently assess the value of your home. For the purposes of preliminary research, searching real estate sites for similar homes in similar areas, plus taking into account the assessed value of the home for tax purposes can help determine a rough amount that the home is worth. If the tax value and similar property’s asking prices are comparable, you have a good rough number to work with.
Doing this shields you, the home owner, from surprises later, after money has been spent on a formal appraisal. If the amount currently mortgaged is close to or more than the appraised value then it becomes very difficult to secure a remortgage and the expenses associated with going through the remortgage process would be better served going towards the principle on the home at this time.
Step Two: More Research
The next step in the process of remortgaging a home is to research banks to find the best rate, lowest closing costs and best service. There will likely be a compromise between these elements. Your preliminary research likely will help make this step far easier as you have already looked on various bank sites for information.
Step Three: Select an Institution
As part of your research, now that you are sure you are ready to remortgage, is to start contacting banking institutions. The ultimate goal is to solicit quotes for the remortgage from more than one company. Be clear when speaking with banking representatives that you are getting multiple quotes; this will help assure that you are getting the best rates and lowest closing costs each institution makes available. Once you have secured these quotes, choose the one which is the best. Lower closing costs may seem good but if the interest rate is not as good, over time it makes less and less sense. The opposite is also true so finding the offer that strikes the best balance is critical.
Step Four: Inspection and Appraisal
One of the least enjoyed parts of the process is the inspection and appraisal. The bank will often send their preferred appraiser out that they trust to do a fair job. In this situation, there is not the competitiveness that an appraisal for purchase may have so it is already more relaxed. On top of this, you have already done some research into the home’s value so you are braced and ready for whatever the appraiser has to say.
Be available the day of the appraisal so you can answer any questions the appraiser has and can point out any upgrades you have made to the home since it was originally purchased, as these will affect the price of the home. Again, the research you have done helps soften the blow if the appraisal is off the mark and gives you an opportunity to argue its accuracy to a certain extent. It also makes a good appraisal somewhat anti-climatic as you already have a good idea what your home is worth.
Step Five: Sign On the Line
The typical paperwork for a remortgage is quite a bit less than the paperwork that is needed at the closing of a new home but still takes a little while to go through. Plan a few hours so there is no need to rush through things and try to read as much of the paperwork as possible, especially making sure that everything in the paperwork is as was agreed to during discussions with the banking agent handling the remortgage. If there are any discrepancies, stop right there and don’t sign anything else until they are fixed because once your signature is on the paperwork, it is a binding agreement that cannot be changed.
The agent should be willing to fix any paperwork that is not correct right then and there. If things are not as they were agreed to ahead of time and top of this the agent is unwilling to fix them, be prepared to either escalate the issue to a supervisor or simply leave. If your research into the customer service side of things was done, this hopefully will not be an issue. Once the paperwork is signed, you are done until your first mortgage payment on your remortgage comes due and you start enjoying the savings from all of your hard work.