Remortgaging can be a great way to secure an interest rate, release equity, or consolidate debts. However, the process isn’t always as smooth as we’d like it to be, and sometimes, navigating the financial waters of remortgaging can be quite challenging.
Here, we’ll explore the top 5 problems homeowners often encounter when remortgaging—and offer some solutions that could make the process easier for you.
Problem 1: Poor Credit History
The Issue: Your credit score plays a significant role in determining your eligibility for remortgage deals. A poor credit history can be a roadblock in securing a favourable rate or even getting approved at all.
The Solution: First, get a copy of your credit report to understand what you’re dealing with. Take steps to improve your credit score by paying off debts and ensuring all payments are made on time. It’s also advisable to consult with a mortgage advisor who specialises in bad-credit remortgages. Some lenders are more forgiving about poor credit scores, especially if you can prove you’re financially responsible now and have been paying your mortgage every month with no missed payments. Click for more advice on How to Uplift Your Credit Score.
Problem 2: Early Repayment Charges
The Issue: Exiting your current mortgage deal early can result in Early Repayment Charges (ERCs), which can be quite hefty. This might negate the savings you’d gain from remortgaging.
The Solution: Review the terms of your existing mortgage to understand the ERCs involved. If possible, time your remortgage application so it coincides with the end of your existing deal or when the ERCs are minimal. A financial advisor can help you do the maths to determine whether remortgaging would still be beneficial despite these charges.
Problem 3: Affordability Checks
The Issue: Even if you’ve been diligently paying off your current mortgage, you’ll still need to pass affordability checks by your new lender. These checks have gotten stricter over the years due to Financial Conduct Authority (FCA)* regulations.
The Solution: Prepare all necessary financial documents, such as proof of income, bank statements, and details of your outgoings. You may also want to cut back on any excessive spending in the months leading up to your application. A mortgage advisor can help you understand how lenders will view your application and offer advice on improving your affordability.
*The Financial Conduct Authority regulates the financial services industry in the UK. Its role includes protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers.
Problem 4: Property Value Changes
The Issue: If the value of your property has decreased since you bought it, you might find yourself in negative equity, meaning you owe more than your property is worth. This makes remortgaging challenging.
The Solution: You might need to wait until property values recover or until you’ve paid off a larger portion of your current mortgage. Consult a mortgage advisor for the best course of action tailored to your situation.
Problem 5: Complexity and Costs Involved
The Issue: Remortgaging can involve various costs like valuation fees, legal fees, and broker fees, making the process expensive and complex.
The Solution: Speaking to a mortgage advisor to compare the rates and products available, comparing the rate as well as any incentives offered by the lender, such as cash back or free legals. A mortgage advisor will help find a lender who offers the best deal that matches your needs.
In Conclusion
Remortgaging is a significant financial decision and comes with its own set of challenges. But with careful planning, research, and professional advice, you can navigate these issues successfully.
Remember, financial situations are unique, so it’s always best to consult professionals for tailored advice.
If you’d like further advice on remortgaging, or help with your options, contact on of our friendly advisors today.