Remortgaging is when you switch the mortgage you currently have on your property, either to a new lender or to a different deal with your current lender.
It’s rare for someone to take out a mortgage and stick with the same deal throughout the term until it is paid off. It’s much more likely that as your personal circumstances change, you will remortgage to get a new deal that suits your adapting needs and budget.
Each household is different and there are various reasons why you might look to remortgage.
Your current deal is about to end
Most mortgage deals typically last between two and five years. If you took out a fixed rate mortgage and are paying the same amount every month, once the fixed rate expires, you may revert to your lender’s standard variable rate (SVR). This could be considerably higher and greatly increase your monthly payment.
To avoid being transferred to the SVR, you should start shopping around for cheaper mortgages from between six to four months months before your current deal ends. This is usually the time when many homeowners look to remortgage in order to switch to a better deal.
You want to be on a better rate
Low interest rates provide an opportunity to save money by remortgaging. Bear in mind that switching to a better rate with a new provider may involve paying a small exit fee to your current provider. However, the extra charge could be worth the cost as there may be significant savings when you switch provider for a better rate. It is a good idea to take advice if you are considering this.
You want to release equity
If your home has increased in value during the period of your mortgage, you may want to unlock the value of your property and turn it into a cash lump sum through equity release. Remortgaging is one way to achieve this as it can be built into the terms of your deal.
You want to fund home improvements
Very often the upheaval and cost of moving home is enough to convince homeowners to improve their current property rather than move to somewhere new. Whether it’s a loft conversion, extension or conservatory you plan to build, remortgaging to gain funds can be a sensible option. By investing in your property in this way, you’ll likely see a return on it the future.
Your personal circumstances have changed
If your circumstances have changed due to ill health, job loss or other personal reasons, you may find yourself in a position where you’re no longer able to make payments on your mortgage. If this applies to you, it is worth talking to a broker who will help you consider the options available to make your monthly payments more affordable.
You want to avoid any interest rate rise
If you’re on a variable rate mortgage such as a discount or tracker and the Bank of England base rate increases, your payments could rise significantly. Bear in mind that the rise may only affect new customers, meaning your mortgage may not automatically be affected.
Your home value has increased
If your property has increased in value since you took out your mortgage, you may be eligible to remortgage at a lower loan-to-value (LTV) ratio than the original loan. You’d need to do your sums, but it could lead to significant savings so is definitely worth a look.
You want to make over-payments
If you’re recently inherited money or are in a higher paying job than when you took out your mortgage, you may want to make over-payments but your current lender doesn’t allow you to. Remortgaging with a different lender who allows you to make over-payments is the obvious option. This also provides an opportunity to reduce your loan size and potentially get a cheaper rate.
You want to switch from an interest-only to repayment mortgage
If you’re on an interest-only mortgage but would now like to move to a repayment mortgage, then your lender should be able to make this change for you. However, if your current provider can’t offer you the deal you want, then now is a good time to get the deal of your choice with a new lender.
There are lots of reasons why you might look to remortgage. A broker can weigh up the benefits of remortgaging and help identify whether there are opportunities to save money on your monthly repayments. Speak to an expert today.