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Remortgaging could be the key to finding a better deal but it's not as easy as it used to be. If you are hoping to find a lower rate of interest with another lender, here are a few tips for remortgage success.
The chances are that when you took out your original mortgage, the property market was booming and lenders were all too happy to help. Now though, mortgage companies are keeping a close eye on potentially risky borrowers, and your credit rating will likely play a huge part in your ability to remortgage.
Missed or late payments, not to mention failed attempts to borrow from other lenders, will all have left their mark on your credit file, and this could seriously affect your chances of getting a better deal. Get hold of a copy of your credit report to check that all the information is correct, and notify the credit reference agency if there are any mistakes.
If your file isn't in tip top shape, there are things you can do to improve your score. Obtaining credit cards, using them for small purchases and paying the full amount at the end of each month will help to build your score, and do make sure you are on the electoral role, as lenders always look more favourably on those who are.
Beware of fees
You might think it's as simple to switch mortgages as it is to switch energy supplier, but the fact of the matter is that remortgaging often comes at a price.
Watch out for valuation surveys and arrangement fees charged by your new lender and, if possible, find a deal that offers these for free. Though the interest rate will likely be a little higher, you won't get caught out by upfront costs.
In the current economic climate, many banks are keen to see people who are saving, and are more likely to lend to those that are putting money aside. If you have a savings account or ISA as well as a current account with your bank, it may be worth asking what deal they might be able to offer as they will almost certainly take this into account and you might just get a better deal as a result.
Fixed or variable rate?
The decision as to whether to take a fixed or variable rate deal is more important now than ever before. Sign up for a fixed-rate mortgage and the chances are you'll be paying more right now than those on variable rates. The advantage, however, is that with the cost of living still on the rise, a fixed rate means you know what your mortgage will cost each month. And if rates should go up, you could be in a good position a few years down the line. Be aware though that you will be charged if you decide to move within the period of your fixed rate.
A variable rate might seem the more attractive option, particularly if finances are tight, and if you go for a variable rate deal, a tracker is probably your safest bet as it is linked to the Bank of England base rate.
Talk to your existing lender
With lending criteria so tough and the average house price having dipped, many homeowners may find they struggle to find a better deal elsewhere. But don't rule out your existing lender. Even if they can't offer you the best deal around, it may well be possible to switch to another product with the same lender, potentially giving you a better rate of interest or a new fixed rate deal.