Choosing the right mortgage the first time around is never an easy decision. Remortgaging your property at a later date could be even more challenging.
Remortgaging could be a fantastic financial decision. It could help you to make some important changes or access the money you need, but remortgaging could also be an expensive mistake.
In order to make remortgaging worthwhile, you’ll need to have considered it fully.
Remortgaging costs money, with fees and charges that might wipe out all potential benefits. Make sure that you’ve received good remortgaging advice and fully understand what you’re agreeing to.
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When you first buy property, it’s likely that you haven’t paid for the property in cash. Most people don’t have that kind of money, so they end up relying on a mortgage. The mortgage is a large loan secured against the property and usually paid back over several years or decades.
Once you have a mortgage, you can remortgage if you want. Remortgaging is taking out a different mortgage, moving your debt somewhere new. You might remortgage with the same provider or with a completely different lender.
You don’t need to stay with the same mortgage deal from the day you first take your mortgage out. At times it can be beneficial to switch your loan to somewhere new, so you can take advantage of better rates or adapt to your own changing requirements. In some situations, remortgaging includes borrowing a little extra money. You might transfer a £120k mortgage, but ask the new lender for £140k. This is called additional borrowing, providing you with extra cash by adding to your mortgage loan. Not all lenders will agree to approve an application for additional borrowing
There are several reasons why people choose to remortgage. For some, remortgaging is a chance to get a better rate and save money. For others, remortgaging frees up money for other important purchases. Some remortgage for home renovations and improvements, with the hope that the changes they make will increase their property value. Others remortgage to repay other debts, or to give a cash gift to someone else.
There are times when remortgaging your home could be financially beneficial. You could reduce monthly payments or help a son or daughter to get on the property ladder. There are also times when remortgaging your property might not be the best idea. There are also times when remortgaging might help in the short term, but not in the long term.
If you’ve remortgaged to clear your debts, the broker or lender might not have been clear about what this decision would entail. You might have used the cash to clear credit cards, loans and other forms of finance elsewhere. This is debt consolidation – putting all your debts into one place, to reduce your monthly payments and the number of creditors you’re dealing with. In this case, you’re paying off all other debts and absorbing those debts into your mortgage.
Though debt consolidation might initially help by making your debt easier to manage, it will add to your mortgage and might work out more expensive overall. You’re potentially trading short term debt for a larger loan that lasts longer, which means interest will be charged for several years when debts otherwise would have been paid off.
Debt consolidation might reduce your monthly outgoings and costs, but it could result in more money being owed overall.
If you were offered the option to consolidate your debt by remortgaging, and if the lender or broker didn’t explain the full long-term costs of making this decision, your remortgage could have been mis-sold.
Whatever your reason for remortgaging, there are several ways that your mortgage could have been mis-sold.
Your remortgage may have been mis-sold if broker fees were hidden or not clearly specified, or if you weren’t made completely aware of the mortgage terms and how remortgaging would affect you.
People often remortgage when they’re close to retirement, using the money to plan for the future or support their adult children. Your broker or lender should have made sure that you understood the full implications.
You should have been made fully aware of the costs of remortgaging, including how much you’d be paying back each month and the total you would end up paying back.
If you think your remortgage was mis-sold, you may be entitled to claim compensation for any financial loss you’ve suffered.
If your remortgage was mis-sold, you could be entitled to claim compensation for your losses. The process for claiming compensation is the same as it would be if your first mortgage was mis-sold.
You’ll need to act quickly to increase your chance of a successful compensation claim. In most cases, you’ll have just three years to complete your claim for compensation.
First, you’ll need to work out who is responsible for your mis-sold remortgage. This will be the lender if you applied directly or a broker if you used a middleman.
Sometimes it’s not clear that a broker has been used, so you might need to do your research. It should have been clear if you were using a broker, but some hide their fees in the costs of your mortgage, so you can’t tell exactly who you’re dealing with. If broker fees have been hidden, that’s another way that your remortgage has been mis-sold.
Once you know who’s responsible for the mis-selling, gather evidence to show what they’ve done wrong. This could be paperwork with missing information or letters that make untrue claims. Your documents might show how remortgaging costs were not clearly laid out or how you were approved for additional borrowing without a full budget assessment.
The more evidence you can bring together, the more chance of your claim being successful. At this stage, you can approach a solicitor if you don’t want to work alone. A solicitor might increase your chance of success, but they’ll charge a fee to represent you. You can make a claim on your own with just a little more effort.
Write a formal letter to the broker or lender that you used to remortgage your property. This letter should explain why they were at fault and how amends can be made. The compensation you receive should only put you back into the position you should have been in, without your mis-sold remortgage. Be realistic about how much money you’ve lost and how you’d like them to put things right.
Wait up to eight weeks for a reply. You need to give the lender or broker time to formulate their response.
If your lender or broker doesn’t respond within eight weeks of receiving your letter, you can complain to the Financial Ombudsman and ask them to look into this for you. You can also contact the Financial Ombudsman if you received a response but feel that not enough has been done to correct the mistakes that were made.
Here at Money Savings Advice, we have partnered with one of the UK’s leading Compensation claims specialist, and they have already helped thousands of our readers get the compensation they deserve for mis-sold endowment mortgages.
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