Remortgage Planning

There are many reasons to remortgage which include –

  • Getting a better rate
  • An existing product coming to an end
  • An existing mortgage coming to an end
  • Restructuring existing debt
  • Home improvements
  • Divorce or separation
  • Transfer of equity
  • Holidays
  • New Cars
  • Gifting money to family
  • Investment into a business
  • Buying a holiday home
  • Buying a buy to let investment property

In the same way that each individual person has a unique set of circumstances, each of these plans requires it’s own unique approach.

We will look at each of these areas individually over the coming months, but in the first instance, let’s run through the basics of getting ready to remortgage.

FAIL TO PLAN…..

As with most things in life, preparation is vital to getting the best results.

First of all, you need a goal. What are you looking to achieve and when (it’s good practice to ask yourself why as well, just to make sure it’s a good idea).

Second, you need a plan. This is where speaking to a specialist adviser can help. A good adviser will help you organise your thoughts and ask the right questions to help you get the mortgage you need at the same time as avoiding any potential pit falls.

TIMING

Timing is important. If possible, it’s best to start planning around a minimum of 6 months prior to when you will need the mortgage. This gives plenty of time for research, assessment of documentation and financial preparation (I.e. does some existing debt need to be reduced / repaid, is any work required on the credit score etc).

Another point around timing is when to apply. This will depend on the lender, as some make offers that are valid for 3 months and some for 6 months (it’s pointless applying 6 months in advance with a lender who only provides offers which are valid for 3 months).

You also want to make sure that any new mortgage isn’t taken out at the wrong time (I.e. because an existing rate is cheaper, the existing mortgage has early repayment charges etc)

ASSUMPTION

There are a couple of sayings around assumption. I’m afraid none of them are suitable for this text, but I can confirm that they are not complementary.

We speak to people all the time who make assumptions about their ability to be approved for a certain amount mortgage amount based on a number of assumptions. These include –

  • Recent pay rises
  • Recent bonuses
  • A rise in self employed income
  • Clever tax planning
  • Their credit score
  • Their property value
  • Their net asset value

The only way to know for sure it to get all of the standard information required together (I.e. bank statements, proof of income, credit report).

It then needs to be properly assessed from your preferred lender’s point of view to pre-empt any issues. Then Affordability needs to be properly checked and it’s only when these criteria have been met should you request for a formal agreement in principle.

Never assume….

GET A CREDIT REPORT!!!

When we request copies of credit reports, we have many queries and questions such as –

‘Doesn’t the lender do the credit search’

‘I’ve never missed a payment on anything’

‘I don’t want too many credit searches done’

‘I don’t want to pay for a credit report’

Simply put, nowadays everybody has access to their own credit report and there are ways to obtain these at no cost.

To get this information does not involve a credit search as it’s simply information gathering (you’re not applying for credit at this stage). However, it is a vital tool in both mortgage planning and ongoing financial management.

A person’s credit report is what the lender will see when they carry out their search. By having this information beforehand, you can pre-empt any issues and know to the penny, how much each of your credit agreements have outstanding AS PER THE CREDIT REPORT (this is what a lender will go by, not the actual balances as in most instances there is a time lag).

As it’s easy to obtain and can be done so at no / low cost, credit reports should not only be available for mortgage planning, but a vital tool in a person’s ongoing personal financial management. These should be used and as readily available as a person’s payslips or bank statements.

Furthermore, it’s very common for information to come to light after an agreement in principle or application has been made. This can create issues (and of course register a credit search) which could have been avoided if a credit report had been properly assessed beforehand.

Times have changed. Credit reports are a vitality important tool with both mortgage planning and personal financial management.

AFFORDABILITY

The most important thing is to check is affordability, both now and in the future. This is same for all mortgages, but particularly poignant in cases where further money is being raised.

Rates are still very low  at the moment, but this won’t be the case forever. As advisers, we want you to achieve your goals and help through mortgage planning when it’s relevant, but financial security must be the main priority, both now and in the future.