Could You Save by Remortgaging?
As a doctor, dentist, or medical professional, your mortgage is likely to be your biggest monthly expense. With interest rate changes and new deals appearing frequently, remortgaging could help you save money and potentially save you thousands of pounds each year.
What is Remortgaging?
Remortgaging means switching from your current mortgage rate to a new one. You can either:
- Stay with your current lender and switch to a different product – this is often called a product transfer
- Move to a completely new lender
Think of it like switching energy suppliers - you’re looking for a better deal on the same service.
Why Should Remortgaging be Considered?
1. Avoid Higher Standard Variable Rates
When your initial rate ends, your lender will automatically move you to their standard variable rate (SVR). This rate is usually much higher than competitive deals available elsewhere. You could end up paying hundreds of pounds more each month.
2. Take Advantage of Better Rates
Some lenders offer special remortgage rates which include other incentives like a free legal service. With this you may be able to secure a more competitive deal when switching mortgages.
3. Release Equity
Perhaps you need funds for:
Remortgaging can unlock the equity in your home to fund these opportunities. The amount you could borrow will depend on your property's value and your financial situation.
4. Improve Your Monthly Budget
If you are able to obtain a lower rate, you may have lower monthly payments which means more money for:
- Building an emergency fund
When Should You Remortgage?
The Best Times to Remortgage:
- 3-6 months before your current deal ends - This gives you time to find the best rates
- When interest rates drop - You might secure a better deal
- When your property value increases - This improves your loan-to-value ratio
- When your previous rate is higher than current offers - Comparing your previous rate to what's available now can help you decide if it's the right time to remortgage
Special Considerations:
- After completing training - Moving from junior doctor pay to consultant salary
- When changing from locum to permanent work - More stable income often means better rates
Your current circumstances, such as changes in employment status or income, can significantly impact the remortgage options available to you.
Types of Remortgage Deals
Fixed Rate Mortgages
A fixed rate mortgage keeps your interest rate the same for a set period (usually 2-5 years). This gives you:
- Predictable monthly payments
- Protection against rate rises
Variable Rate Mortgages
Your rate can go up or down. Options include:
- Tracker mortgages - Follow the Bank of England base rate
- Discount mortgages - A set discount off the lender’s SVR
- Standard Variable Rate - The lender’s basic rate (usually the most expensive)
How to Remortgage
Step 1: Check Your Current Deal
Look at:
- Your existing mortgage deal, including when your current rate ends
- Any early repayment charges
- Your current monthly payment
- Your outstanding mortgage balance
Step 2: Shop Around
Don’t just accept your current lender’s renewal offer. Compare other deals available in the market and consider:
- Product features (overpayments, payment holidays)
If staying with your current lender is best deal – you can select your rate and this will simply come into effect when the current rate ends.
If you opt for a new lender - you can start the application process
Step 3: Get Your Documents Ready
You’ll need:
- Tax Year Overviews & Tax Calculations
- Bank statements (3-6 months)
- Proof of identity and address
Lenders will use these documents to carry out affordability checks, assessing your ability to repay the mortgage before approval.
Step 4: Apply for Your New Mortgage
When starting your mortgage application, your new lender will:
- Check your income and affordability
- Value your property (your home will be valued to determine its current worth and suitability for a mortgage)
- Conduct a credit check to verify your financial situation and creditworthiness
- If it includes a legal service, they will put you in touch with the appointed firm
Your new mortgage payment will be calculated based on the terms of your new deal.
Step 5: Complete the Switch
The process typically takes 4-8 weeks. Your new mortgage provider pays off your old mortgage and your new deal begins.
Costs to Consider
Leaving Your Current Mortgage:
- Early repayment charges - Usually 1-5% of your outstanding balance. This fee is applied if you pay off your mortgage before the end of your deal. We would look to time the remortgage so you do not incur this charge where possible.
- Exit fees - Administrative charges (usually under £100) that may be payable when you leave your current mortgage – this varies from lender to lender
- Deed release fees - Around £100-£300
Setting Up Your New Mortgage:
- Arrangement fees - £0-£2,000 (sometimes added to the loan)
- Valuation fees - Often free or around £100-£200
- Legal costs – If you appoint your own solicitor this could be around £300-£800 (however most lenders offer a free legal service)
- Broker fees - If you use a mortgage adviser
Many lenders offer fee-free deals or cashback to cover these costs.
Professional vs DIY Remortgaging
Benefits of Using a Mortgage Adviser:
- Access to exclusive deals not available to the public
- Expert knowledge of medical professional mortgages
- Help with complex applications (especially for locums)
- Handling all paperwork and liaising with lenders
- Often no cost to you (lenders pay the fees)
- A mortgage adviser can help you secure the best remortgage deal for your circumstances
Red Flags to Avoid - Don't Fall for These Traps:
- Automatically accepting your lender's renewal offer – They are not always the best deal
- Focusing only on the headline rate - Consider all fees and charges
- Borrowing more than you need - Just because you can doesn't mean you should
- Ignoring early repayment charges - They might make switching uneconomical
- Forgetting about protection - Consider income protection and life cover
