Fee free remortgages
Remortgaging in most cases is a lot simpler than buying. As you already have the property there's no need for the same rigorous legal process, searches, or inspection.
The new lender will want to make sure that the house is sound and worth what you've put on the application form (so may only arrange a ‘drive-by' or even online valuation), but then it's just a case of switching the charge held on the property from one lender to the next.
Because of this, and because they want the business, many lenders offer a free service to switch over, including a free valuation, free legal services, and often no product fees.
Each case is different however so it's important to get good professional advice to determine which is the right product for you at the time of application).
Fixed rate remortgage
In the same way it's important to look at ‘total cost' over your fixed period, it's important to decide which would be the most suitable deal for you in general.
Fixed rates are now very competitive, and in the market over the last year or so, have often been better than variable rates.
Fixed terms can range from 2 years up to 10, and with new products coming and going all the time, it's not uncommon to see fixed periods for even longer.
Tracker rate remortgage
In exactly the same way as fixed rates, most tracker rate mortgages have an initial period where you are tied into a contract, with penalties to pay if you leave early (early repayment charge, ERC).
When calculating the total cost over the initial period, you must also factor in the probability and risk of any rate rises during that time – obviously if you have a tracker the same rate as a fixed rate over 2 years, then it makes sense to go for the fixed to avoid it increasing.
If you don't think rates will change in that time, and the tracker is a lower rate, then maybe it would be the most suitable choice. It really comes down to personal preference and how able you are to sleep at night knowing rates could jump in the morning.
Fixed remortgage or tracker remortgage?
This really is a personal choice and not something that can be decided by reading something you found on the internet.
Over the past few years, fixed rates have competed well against trackers and often come out cheaper, but this may not always be the case.
If you like to know where you are in your payments every month, and think you may feel uncomfortable on a rate that could go up or down, then a fixed would be most suitable– even if after 2 years it works out more expensive, because in reality no-one knows what's going to happen with rates, and it's a gamble either way.
If you fix instead of a cheaper tracker and rates don't move over the contract period, it's cost you more – if you take a tracker for cheaper but rates go up, it may cost you more.
Choosing the right mortgage term
The term you choose to have your remortgage for depends mostly on your current financial situation in general, including your monthly budget and any projected changes in earnings as you move through the term.
25 years is a standard benchmark, as it tends to sit most comfortably all round for those who take a new mortgage – 35 years seems like a long time, and not many people want to be paying a mortgage into retirement.
However, if you are young and expect to be earning a lot more in the coming years, then taking a longer term to have a cheaper monthly payment now, may seem like a much better option.
Generally though, if you have set a sensible budget from the outset, then it would be most suitable to just adjust the term around that.
Think carefully before securing debt against your home, your home
may be repossessed if you do not keep up repayments on your mortgage.