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What is Remortgaging?
Remortgaging is the term used in the mortgage industry to describe changing your current mortgage product. This is usually done with the aim of saving money, however, can be for a variety of reasons.
You can choose to either remortgage with another lender or your current lender may have a better mortgage product available, so you can choose to do a product transfer with your existing lender to take advantage of that remortgage deal.
When should I consider a remortgage?
Timing is the most critical factor in ensuring that you get the maximum amount of benefit from remortgaging. It can be difficult to know when the time is right for you, so below are some examples of good and bad times to consider a remortgage:
Your current Fixed-rate deal is ending
Many people will take out a Fixed-rate Mortgage initially when they buy a property, as they offer competitive interest rates. When the Fixed-rate period ends, you will transfer to the lender’s Standard Variable Rate of interest. It’s a good idea to contact us around six months prior to the end of your current deal to allow time for the remortgage to be processed and avoid paying the higher rate.
The Bank of England base rate rises
If you’re not on a Fixed-rate deal, the chances are your interest rate will be influenced by fluctuations in the Bank of England’s base rate of interest. It’s wise to keep informed about potential rises, as this will affect your monthly repayment amounts.
Your property value increases significantly
When your property rises in value, the Loan to Value rate of your borrowing decreases. This means that you are considered a less risky borrower to Mortgage Lenders and the deals that are available to you will be more competitive. This is therefore a good time to remortgage to save money.
Your mortgage terms don’t allow overpayments
Overpaying your mortgage can be really advantageous for those who can afford to do so. Unfortunately, not all mortgage terms allow for this, so it may be worth looking at remortgaging to a product with more flexible terms. Always bear in mind the exit fees from your existing mortgage when calculating the benefits.
To borrow more money
Some people find remortgaging to be a good option to borrow large amounts of money for home improvements or a vehicle purchase. It can also often be used to consolidate other debts. It’s important to consider standard loans, however, as these may provide a cheaper option for some uses.
For a more flexible mortgage
Many modern mortgages have flexible options such as the ability to take a payment holiday or offset your savings against your mortgage interest. You may consider switching for more flexibility if your current mortgage terms are too restrictive.
Remortgaging not a good idea if your circumstances match any of the following:
High early exit or early repayment fees
When you leave your current mortgage deal there are likely to be charges from your lender, such as early repayment charges and/or exit fees. In some cases, these charges are so steep that they outweigh the benefits of remortgaging. This is especially true if you already have a competitive deal.
You don’t owe much on your current mortgage
If the remaining debt on your current mortgage is less than £50,000 then it’s unlikely that you will financially benefit from remortgaging as the fees would likely outweigh the savings in this situation.
A decline in your financial circumstances
When you remortgage, the application process will require similar financial and credit checks as when you made your original mortgage application. It’s therefore unlikely that lenders would be able to offer you a remortgage deal if you are financially worse off or have incurred adverse credit since then.
If your property is in Negative Equity
Negative equity occurs when you owe more on your mortgage than the current value of your home. Lenders will not be willing to remortgage your property in these circumstances.
What fees are associated with a remortgage?
You can expect to pay similar fees as a standard mortgage application, such as:
- Arrangement fees
- Booking fees
- Legal fees
- Valuation fees
A deposit is not usually required, but it can improve your chances of achieving a remortgage offer if you have low equity in your home.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
How can Mortgage Advice Centre Mortgage Advisers help?
At Mortgage Advice Centre we will help you to decide whether now is the right time to consider a remortgage. Through careful consideration of your individual circumstances and a review of your current mortgage status, we can advise you whether you will benefit from remortgaging your property and, if so, which lenders will offer the most competitive deals to people in your circumstances.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.