Knowing when the right time to remortgage is can sometimes be tricky. You might have heard your friends talking about how they remortgaged the house and added a huge two-story extension, giving them the room they needed for their young family. However, it's important to remember that everyone's circumstances are different and just because that worked for your friend, doesn't mean that it could be the right thing for you too.
There are lots of times when we'd advise against remortgaging...
Little equity
If you owe your lender more than the property is worth, then you’re in what they call ‘negative equity’. It can be difficult to remortgage your house when you’re in negative equity - unless you have separate funds to repay the difference.
However, don’t just assume this is impossible. Everyone’s circumstances are different, just like every lender’s criteria is different, so it’s always worth speaking with a mortgage adviser to consider all your options.
Finances have dropped
Lenders now have to see evidence of your income against your outgoings and carry out thorough credit checks. So if your income has dropped since you last took out your mortgage (perhaps you only work part-time now or your partner has retired) the lender might be more cautious about lending you the money.
Already on a low rate
It might be the case that you’re already on a low rate and you don’t need to move to another one. Perhaps at that moment in time, there is no better rate than the one you’re on.
Large early repayment charges
If you pulled out of your current mortgage deal before the term is up, it could well come with a hefty early repayment charge which might make you think twice about switching. However, some lenders might be willing to waive the charge if you’re sticking with them and are just moving to a new deal.
If remortgaging isn't the right option for you right now, then you might want to consider something called a product transfer. This is where you stay with your current provider but you change your existing mortgage deal over to a new one that's more suitable for you.
By speaking to a mortgage adviser, you can find out more about your different remortgage options, to make sure you have all the facts before making a final decision that is right for you and your family.
Have you also read our 'Should I remortgage?' article yet?
Important information
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 on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
You may have to pay an early repayment charge to your existing lender if you remortgage.