Mortgage renewal advice needed?

Question

I am asking this question way earlier than I need to but the rapid rise in UK interest rates is a bit worrying! I took out a fixed-rate (4.79%) interest rate this time last year when I was a first time buyer. It is fixed for 2 years meaning that I will need to renew by April 2008. Can anyone please advise on how to go about remortgaging, how much time it takes, any extra costs that need to be considered etc. My dream is to switch to a repayment deal but, with interest rates rising in the UK, Im not sure if I will be able to afford it. I'd be very grateful for any mortgage renewal 'do's' and 'dont's'. Thanks.

Answer 1

I'm going to assume 'no overhang' - i.e. in Apr 2008 you can remortgage without penalty.

You existing lender should write to you the month before the end date advising you of your options (sometimes they will offer you another deal, sometimes they just say 'you are on our standard rate')

There should be plenty of special offers available ...
assuming you end date is mid April, you can assume it will take about 4 weeks for a straight forward remortgage, so you should start looking for a new deal end Feb/start March.

As for do's & don'ts ...
Main 'do' == when the first deal comes to an end, always look for a better deal - often your existing lender will often give you another deal if you ask ...

Main don't' = don't 'cash in' early (all special deals have crippling penalty charges)

I recommend you create a spreadsheet to calculate total costs over the next 2 or 3 year deal ... don't just focus on APR - 'application fees', 'legal fees' & 'closure fees' all vary and you need to see the total cost.

Answer 2

Hi there, you have quite a while before you should be concerned about your re-mortgage.

A remortgage should take between 5 - 8 weeks depending on your credit history.

The costs that you need to consider are:
Valuation - £300 ish
Arrangement - between £300 - £1000
Broker fee - £300 - £500

Depending on who you do the remortgage with, some lenders have deals that do not have valuation or arrangement fees, however you will normally pay a higher rate of interest.

You would be better to speak to your bank first, this would give you a benchmark as to the costs involved.
Good luck, hope that helps.