London Road - Portsmouth
End of your fixed rate? Here's why you need to Remortgage!
Why are so many people rushing to remortgage their buy to lets or second homes this year?
In 2015’s Autumn Statement, the then chancellor George Osborne announced the government was introducing a higher stamp duty rate for anyone buying an additional property, such as a second home or buy to let property. It meant anyone buying an additional home after the rules came into force in April 2016 would face paying an extra 3% in Stamp Duty. As a result, there was a surge in activity in the market as people rushed to complete before the deadline.
So are you one of those who took out a 5 year deal which is set to end later this year? If so, it’s time to take action now.
What is remortgaging?
Remortgaging means arranging a new mortgage with a new lender. You can also simply switch mortgage product with your current lender to secure a new deal. This is known as a mortgage product transfer.
How could I benefit if I remortgage?
One major advantage of remortgaging or doing a product transfer is the potential to save you money. This is because if you don’t switch, once your initial period ends, you’ll be automatically rolled onto your lender’s standard variable rate (SVR). This is your mortgage provider’s ‘default’ rate. You may find it is significantly higher than the rate in your initial period. And that your monthly mortgage payments rise sharply as a result.
- For example, if your mortgage amount is £200,000, with an interest rate of 2% over a 25 year term, your estimated monthly repayments will be around £848. But if you’re on an SVR of 4.5% over the same term, payments would be around £111 per month.
There are other reasons why people choose to remortgage. Some opt to do it because they want to borrow more than their current mortgage amount. For example, to raise additional capital to pay for a renovation.
However, these benefits don’t just apply to those with buy to let or second home mortgages. Anyone with a mortgage can benefit from remortgaging or by opting for a product transfer.
What do I need to watch out for?
Remortgaging has the potential to save you a large amount of money. However there are costs involved that you should be aware of, such as legal fees, valuation fees and often lenders’ arrangement fees too. With product transfers you won’t need to pay legal or valuation fees. However, you will be limited to the mortgages on offer from your current lender. Our mortgage advisers can explain all your options to you and talk you through all the costs involved. Our advisers can be particularly useful if you’re taking out a buy to let or second home mortgage. This is because they understand the criteria that lenders are looking for and can compare mortgage deals to help find the right one for you.
When should I start looking?
The remortgaging process can take from a few weeks to several months. So it’s a good idea to start your research well ahead of your current deal ending if you can. But if you’re already approaching the end of your deal or if it already has ended, don’t despair. The sooner you take action, the sooner you can start the process. If you want to do a product transfer, this is usually a much quicker process.
Looking for more information? Call us now on 02392 822616 or email us at [email protected]
Because we play by the book we want to tell you that…
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.