YOUR MORTGAGE IS LIKELY TO BE ONE OF YOUR BIGGEST MONTHLY COSTS AND MAKING SURE YOU’RE ON THE BEST POSSIBLE DEAL CAN MAKE A HUGE DIFFERENCE TO YOUR OVERALL FINANCES.
Remortgaging could save you thousands of pounds, without making any lifestyle sacrifices. Essentially, it’s nothing more complicated than switching to a different mortgage deal.
Just as mortgaging means taking out a loan to buy a property (usually using that same property as collateral), remortgaging means finding a new loan, either with the same lender (product transfer) or another lender, but with different terms.
Remortgage advice
Guide to remortgaging
Product transfers
WHY DO PEOPLE REMORTGAGE?
Usually, people remortgage to find a mortgage deal with a lower interest rate, which means lower monthly repayments and less to pay in total. Often, they’ll be looking to replace an existing fixed rate or tracker rate mortgage that is coming to an end. This avoids switching to the lender’s standard variable rate (SVR) at the end of the period, which is usually higher than the introductory rate.
For most homeowners their biggest outgoing is their mortgage repayment, but by reducing your mortgage rate by even a small amount, you could save thousands of pounds per year.
Mortgage payments could also be reduced by extending the term of an existing mortgage, for example, increasing a 25-year mortgage term to 30 years. However, this option will cost more in the long term due to accruing interest. On the other hand, remortgaging to a different lender may allow you to reduce your mortgage term and enable you to pay it off sooner so that you can be mortgage free.
Some people also remortgage their property to release some of their built-up equity, which can be used as finance to consolidate other debts or fund expensive home improvements, for example.
A remortgage is required when you want to add, or remove, someone from a mortgage. Changes need to be made the property deeds and also the people named on the mortgage. A transfer of equity mortgage will allow both of these to happen at the same time.
Another acceptable reason to remortgage is because, once a significant portion of the original mortgage loan is paid off, the homeowner could apply for a lower LTV (loan-to-value) mortgage, which may have lower rates.
Some people may also want to switch from a variable rate mortgage to a fixed-rate mortgage so they know exactly how much they will be paying each month during times of financial uncertainty.
Can you remortgage a house without a mortgage?
Remortgaging when your house value has increased
WHO CAN REMORTGAGE?
Whether or not you can remortgage depends on the terms of your current mortgage. Some lenders demand an exit fee or early repayment charge, which can amount to more than you’d save by switching. For some, there may be a significant reason to remortgage early, despite the fees that they will incur.
If you have owned the property for less than 6 months then you will be caught by the little known 6 month mortgage rule. The solution to this is called a day one mortgage. But who would need a day one mortgage?
Also, if you’re switching lenders, you’ll need to pass the new lender’s affordability assessment. So, if your financial circumstances have changed (for example, your income is much lower than it was), you may not be able to remortgage with a new lender, although you could still potentially remortgage with your current lender. It may be prudent to get a copy of your credit report before applying to check that everything looks OK.
Remortgaging your home and the amount of time needed will depend on your individual circumstances and remortgage needs. Providing clear, accurate and relevant documents when needed, such as proof of earnings, can speed up the process.
HOW MUCH COULD YOU SAVE BY REMORTGAGING?
If you’re nearing the end of an introductory period on your current mortgage, the default option means switching to the lender’s standard variable rate (SVR).
This is relatively cheap compared to recent years, but may still be nearly double what you might pay by switching. That difference in interest rates could cost you hundreds of pounds a month, or several thousand pounds a year, in repayments.
Most people will re-mortgage to move to a cheaper rate but others will be looking to borrow more money or need a particular feature for their loan.
WHAT STOPS PEOPLE REMORTGAGING?
Some people worry that they won’t be accepted for a new mortgage deal because they’ve been furloughed or have been made redundant. Some feel uncertain about their financial future and want to wait until they feel more secure. Some think that there might be a lot of hassle involved in remortgaging or they need to gather loads of different documents.
These are all valid concerns but not necessarily reasons to remain with your current lender.
Make contact with an independent mortgage broker to assess your options. They will look into your current circumstances and then find suitable deals from all of the mortgage companies.
By obtaining professional mortgage advice you’ll get a better understanding about what mortgages are available to you, what rate you’re likely to be approved for and whether this is the right choice for you now, as well as saving you time shopping around for the best deals.
Top five reasons why homeowners put off remortgaging
