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What you Need to Know About Remortgages
What is remortgaging?
When you change your mortgage deal, either to a new lender or with your current lender, you are remortgaging.
When is a good time to remortgage?
Timing can be crucial with a remortgage and there are a range of personal circumstances that provide a good opportunity to do so. More generally speaking, due to interest rates of just 0.1% in the UK, now is a good time, particularly if any of the following apply:
Your fixed-rate period is ending
When the introductory term on a fixed-rate mortgage ends, you are placed onto the SVR (standard variable rate) of interest. The SVR is set by your provider and is not usually the most competitive rate available.
You want to change your mortgage type
Prior to re-applying, you should be aware that most lenders can move your mortgage from an interest-only to a repayment mortgage without remortgaging.
Interest rate rises are expected
A rise in the UK base rate is always possible, even though it is currently very low. This could affect your monthly payments, regardless of your current mortgage type, so it’s worth looking at your options.
You see a significant rise in the value of your property
When the value of your home rises above the amount you purchased it for, your LTV (loan to value) ratio falls. A lower LTV gives you access to better mortgage rates from most lenders and may mean you can pay off your mortgage more quickly.
You are not allowed to overpay on your current deal
Not all mortgage terms allow you to make overpayments towards your mortgage. Making overpayments can be very beneficial if you can afford to do so. It can reduce both the length of your mortgage and your monthly repayments.
It may be possible to transfer to a mortgage which does allow overpayments. You should always consider early exit fees or an early repayment charge on your current mortgage.
You want to borrow more money
Remortgaging is sometimes a way to borrow more money, rather than taking out a loan. This is typically for large loans, such as for car purchase or home improvements.
You want a more flexible mortgage
Flexible mortgages can allow you benefits, such as a payment holiday or the offset of your savings against mortgage interest. If you would prefer more flexible terms than your existing mortgage deal allows, then remortgaging may be an option.
When is remortgaging not a good idea?
The early exit fees on your current mortgage are high
If the exit fees on your current mortgage are very large, they often outweigh the benefits of remortgaging, regardless of how good the new deal is. This is something you should consider carefully.
You already have a great mortgage rate
If your current mortgage deal already provides one of the best rates available, it’s unlikely you’ll save money by remortgaging.
You don’t owe very much on your mortgage
If your outstanding mortgage balance is low then remortgaging may not benefit you. The fees can outweigh any interest savings.
You’re worse off financially then when you got the mortgage
If your financial circumstances have changed or your credit score reduced, since taking out your original mortgage, new lenders are very unlikely to accept a remortgage application.
Your property is in negative equity
If the value of your home has fallen since you took out your mortgage, your LTV will be higher. This can leave very little or even negative equity (you owe more than the property’s current value) in the property. Mortgage lenders won’t accept an application for remortgage in these circumstances.
What happens if I don’t remortgage when my current deal expires?
If you choose not to remortgage you transfer to your lender’s standard variable rate (SVR). Your lender’s SVR will typically have a higher interest rate, meaning that your monthly repayments could significantly increase.
What fees are there to remortgage?
Remortgaging can have similar fees to a standard mortgage application, such as arrangement or booking fees.
How can a mortgage broker help?
It can be difficult to establish the best time to apply for a remortgage. A mortgage broker can advise you, based on your personal situation, if the time is right. They also know which lender is most likely to accept your application, and are able to offer the best remortgage deals available, which can sometimes include exclusive products.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.