What is Remortgaging?
Remortgaging is the term used to describe you changing your mortgage deal. You’re able to remortgage with a new lender or to choose a different mortgage with the same lender often referred to as a product transfer.
When is a good time to remortgage?
Generally speaking, now is a good time to remortgage, due to the very low Bank of England base interest rate of just 0.1% in the UK. There are a range of personal circumstances that can also mean it’s a good time to consider a remortgage:
Your current fixed rate is ending
A fixed rate mortgage has lower interest for an introductory fixed term. When the term ends, you are placed into the SVR (Standard Variable Rate) of interest, which is set by your mortgage provider. The SVR is generally higher than the initial fixed rate.
You want to change your mortgage type
Most lenders can change your existing mortgage from an interest-only to a repayment mortgage, however they will consider the affordability of doing so.
You’re concerned about interest rate rises
As mentioned above, the UK base rate is currently very low, however a rise is always possible. Whichever type of mortgage you have, you could see changes in your monthly payments if the base rate changes and your mortgage is linked to the base rate. If you have a fixed rate there is no need to be concerned about interest rises until you’re nearing the end of the fixed rate period.
The value of your home rises considerably
If your home is worth more than when you began the mortgage, your LTV (loan to value) ratio will be lower. A lower LTV gives you access to better mortgage rates from most lenders. This is also a good reason to contact your Mortgage Broker to see if you qualify for a better rate.
You’d like to make overpayments, but your mortgage terms don’t allow it
For whatever reason you choose, making overpayments on your mortgage can reduce the term and benefit your future. Many mortgage terms prohibit this, so it’s worth checking yours.
There are mortgages available which allow for overpayments. Remember to consider, however, whether your current mortgage has early exit fees.
You want to borrow more money
If you’d like to carry out some home improvements or consolidate your other debts, Remortgaging is sometimes a way to borrow more money but you should always seek advice before doing so..
You want a more flexible mortgage
There are a range of flexible mortgages available these days. Some allow you to take a payment holiday, some even allow you to offset savings against the interest. If you’re tempted by flexible options in other mortgages, you might benefit from Remortgaging.
When is Remortgaging not a good idea?
You have high early exit or repayment fees
If you’ve found a more attractive mortgage deal available, there are some circumstances where Remortgaging will not benefit you. If the exit fees are very large, they often outweigh the benefits..
You already have a great mortgage rate
After looking at the other options available, you may find that you already have one of the best rates available. In these circumstances, it’s unlikely to be worth Remortgaging.
Your remaining debt is very small
If the remaining outstanding balance on your mortgage is lower than £50,000, Remortgaging is unlikely to benefit you. The fees involved often outweigh any interest savings you would make.
Your financial circumstances worsen
If you’re in a worse financial situation than you were when you took out your mortgage, a remortgage will not usually be an option. Much like if you’ve had recent adverse credit, your application is unlikely to be accepted.
You have low or negative equity in your property
If your home is worth less than it was when you took out the mortgage, your LTV will be higher. In this case you will probably have very little or even negative equity in your home (you owe more than your home is worth). A lender will not offer a remortgage in these circumstances.
What happens if I don’t remortgage after my deal expires?
There’s no requirement to remortgage, it’s your personal choice to do so or not. If you choose not to remortgage you will transfer to your lender’s standard variable rate.
It’s always worth checking whether a better deal is available, as an SVR can mean that your monthly repayments become higher.
What fees are associated with a remortgage?
The fees involved in Remortgaging are similar to your original mortgage, such as arrangement, booking and legal fees. Sometimes you will also need to pay valuation fees.
Whilst a deposit is not expected, it can improve your chances of acceptance to offer one.
Product transfers may only come with a fee from a broker if they charge you for their services, however a lot of brokers will not charge a fee for these.
How can a Mortgage Broker help?
A Mortgage Broker can advise you when the best time is to consider a remortgage based on your own circumstances. They also have access to a wide range of deals that you may not find on the open market.
Using a Mortgage Broker for your remortgage can help you choose the lender most likely to accept your application, as well as find you the most appropriate deal possible.
Debt consolidation is not always the most suitable option, consolidating debts must be carefully considered. It will usually mean more interest over a longer repayment term and there may also be early repayment penalties on your current mortgage, you should think carefully before securing other debts against your home. There are other ways to manage debt such as free debt advice charities, you can find out more by contacting the Money Advice Service https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator these services may be more suitable for you