Are you re-mortgaging now?

Jan 15, 2023

Are you re-mortgaging now and (sensibly) reserving a new deal ahead of your current rate ending later this year?

In particular if you have a capital and interest (aka repayment) please read this!

In between applying for a mortgage and completing, 6 months or maybe more could have passed. You would think the balance would be much lower than it is now. However, the amount of funds needed to pay off your old mortgage, on the day you complete, can still be higher than you think! Here are some reasons:

Your mortgage balance doesn’t fall by the same amount every month. Estimating where it will be in 6 months isn’t as straightforward as you might think. (Google amortisation).
Sometimes your mortgage ‘balance’ showing on your online account doesn’t include a fee that (needs to be included in the redemption balance) that was added to the loan when you first started your current deal.
There can sometimes be “account fees” (separate to early repayment charges) payable to redeem the mortgage.
The cashback on most new mortgage deals is only released AFTER completion. Therefore the solicitors redemption statement will also include the cost of their work.

Applying for a re-mortgage is, by nature, trying to hit a moving target (at least for a capital repayment mortgage). You will therefore risk either overestimating or underestimating the funds needed

Where there is a shortfall, you will need to get the mortgage offer reassessed and reoffered, often there is not enough time left to do this and you could lose the product you so diligently reserved months back!

Therefore, assuming the new mortgage deal has allows penalty free overpayments (most are 10% of the balance per annum), it is better to overestimate and have a surplus that can be immediately paid back to the new mortgage lender (overpayment), than to underestimate and face a shortfall.

If you want to chat to us about anything mentioned in this article, use the contact form here to get in touch.

Steven Morris – Advising Director

CeMAP CeRER

 

Steve loves a complex mortgage. Most recently he has used his technical geekery to work his way up through Which? Mortgage Advisers, progressing to Senior Adviser and then Onboarding Manager. There, he was responsible for hiring, training and managing new advisers.

He also ran the monthly new starter inductions and wrote and maintained the telephony advice standards of the company. Outside of work Steve can be found coaching and being run ragged by his local under 10’s rugby team, Bristol Harlequins RFC.

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