Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
What is Remortgaging?
When you change your mortgage to a different product, it’s known as remortgaging. You might choose to remortgage your property with a new lender to take advantage of a better deal or, in some cases, you can change to an alternative mortgage product, with your existing Mortgage Lender, this is called a Product Transfer.
If you want to change your current payment type from interest-only to a repayment mortgage, but are happy to keep the remainder of the existing terms, you will not usually need to remortgage to do so, and most lenders can accommodate this change administratively.
When should I remortgage?
When you decide to remortgage, timing the switch to suit your current circumstances is the most important consideration. Some circumstance where remortgaging would be beneficial are:
When your Fixed-rate interest period ends
When lenders’ fixed-rate deals end, you will immediately be transferred onto your lender’s Standard Variable Rate (SVR). The Standard Variable Rate is always a higher level of interest, which means that your monthly repayments will increase whilst you’re on this rate.
Bank of England base rate of interest increase
If you opted for a variable or discounted rate mortgage deal, your mortgage interest rate usually follows changes in the Bank of England’s base rate of interest. If there is reason to believe the base rate will rise, you could benefit from remortgaging.
A substantial rise in your property value
If your home is worth more now than when you bought it and you are up to date with your repayments, the Loan to Value ratio of your borrowing will have decreased. Many lender’s will be able to offer more competitive interest rates if your Loan to Value ratio goes down.
To access remortgage deals with flexible options
Modern mortgages often have a range of flexible add-ons. If your current mortgage doesn’t provide these options, you may find long term benefits in remortgaging to:
- Overpay your mortgage – meaning you can pay off your mortgage early or reduce your monthly payments
- Take payment holidays – usually a couple of months break out of each year, to aid big expenditures, such as a holiday purchase
- Offset your savings – which allows you to use mortgage interest by placing your savings with an account held by your Mortgage Lender
A loan increase
Some people find remortgaging helpful to borrow large sums of money against their property, such as major home improvements or consolidating credit card debt. It’s important to consider all other options, however, as remortgaging will not necessarily be the cheapest option.
When is remortgaging not a good idea?
There are high early exit or repayment fees
Early repayment charges and exit fees often apply when you leave your existing mortgage. Where these are particularly high, it can outweigh the benefits you would get from remortgaging.
Your mortgage is close to the end of term
If your remaining mortgage debt is lower than £50,000 it’s unlikely to be beneficial to remortgage as the fees involved will likely outweigh any savings you would have made at this stage in your mortgage.
Decline in finances or credit score
When you apply to remortgage, you will need to meet the lender’s acceptance criteria, just as you did when you took out your original mortgage. If, since your original application, you have developed any credit issues or your income has reduced, it’s unlikely that you will be able to fulfill the remortgage criteria.
The only circumstances where this may not be the case, is if you have gained substantial equity in your property or can offer a large deposit, as this would make the affordability criteria easier to meet.
If you believe you fall into this category, Assured FG may still be able to help you by finding lenders more sympathetic to your circumstances, or even negotiating with your current lender to get you more favorable terms.
In Negative Equity, you owe more money than your property is currently worth. Where this is the case, remortgaging will almost certainly not be an option.
What fees are associated with a remortgage?
- Arrangement fees
- Legal fees
- Valuation fees
However, many lenders now offer products with no valuation costs and a free legal service, meaning you may not have to pay any fees to the lender to switch. We will always do a comparison to find the most cost effective solution for you.
How can Assured FG help?
Here at Assured FG, we specialise in helping clients to remortgage at the optimal time to achieve maximum benefits from their switch. We have access to and can recommend a wide range of lenders and mortgage products, so we can find you the most competitive remortgage deal, regardless of your individual circumstances. Whether you’re considering a move or simply want to ensure your mortgage offers you the best value available, we can support you throughout the remortgage process, keeping you up to date with any progress.