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What is Remortgaging?
Any changes that are made to the mortgage you currently have is considered Remortgaging. There are a variety of reasons you might choose to Remortgage and this can be done with a new lender or by changing your mortgage product with the same Mortgage Lenders (sometimes known as a Product Transfer).
The only change that doesn’t usually require a remortgage is If you want to change your existing mortgage from an Interest-only to a repayment mortgage, as this can usually be accommodated by the lender within your existing terms.
When should I remortgage?
Timing is a critical factor in maximising the benefits of remortgaging. If your circumstances currently align with any of the below options, now is likely to be a good time to remortgage:
End of fixed-rate interest period
When the fixed-rate period ends, your mortgage interest rate will immediately transfer onto your lender’s Standard Variable Rate. This is always higher than the Fixed-rate deals, so your repayments will increase.
A rise in the Bank of England base rates
Mortgages without a Fixed-rate are vulnerable to fluctuations in the Bank of England base rate of interest. If it’s set to rise, it may save you money to remortgage for a better deal.
Your property value increases significantly
If your property value has risen since you bought it, the Loan to Value rate of your borrowing will have fallen. This will often give you access to far more competitive interest rates if you choose to look for a remortgage deal.
You want to overpay
Overpaying your mortgage gives you the opportunity to pay off your mortgage early or to reduce your monthly payments. Not all mortgage terms allow for this, however, so you may opt to swap your mortgage to secure this benefit. You are likely to pay exit fees to leave your current mortgage deal.
A loan increase
Remortgaging can sometimes provide you an option to borrow more money, for home improvements or a large purchase. A standard loan may be a cheaper option for smaller loans, however.
Flexible mortgage options
If your current mortgage doesn’t allow for flexible options, such as the ability to take payment holidays or offset your savings, you may benefit from remortgaging to a mortgage with these options.
When is remortgaging not a good idea?
There are high early exit or repayment fees
You will need to pay an early repayment charge and potentially exit fees in order to leave your existing mortgage. In some cases these fees outweigh any savings or benefits of remortgaging, so it would not be worth going through with it. This is particularly likely if you already have a competitive interest rate.
Your remaining debt is low
If you owe £50,000 or less on your current mortgage, the fees involved with remortgaging are also likely to outweigh any of the potential savings you would make.
Decline in finances or credit score
An application to remortgage requires you to meet the same type of criteria as when you took out your original mortgage. You will be assessed in terms of affordability and your credit score, so if there has been a decline in circumstances with either, it’s unlikely you will be accepted for a remortgage. You could improve your chances if you have a significant equity in your property or can offer a large deposit.
Negative Equity occurs when you owe more than your property’s current value. Under these circumstances, lenders will not accept your remortgage application.
What fees are associated with a remortgage?
As the application process is like a standard mortgage application, you should be ready to pay additional arrangement fees, legal fees and in some cases, for a new property valuation, especially if you’re looking to move home. A deposit is not usually required, although if you have low equity, it can improve your chance of acceptance.
How can First Step Mortgages help?
Here at First Step Mortgage, we can help you to determine the optimum time to consider a remortgage, based on your individual circumstances and current mortgage terms. This will help us to recommend those lenders who are most accepting of your circumstances and able to offer the remortgage rate that will most benefit you.
We can take care of the majority of the administrative side of your application, keeping you up to date throughout the remortgage process, whether you’re moving home or simply looking for a better deal to save money towards the future.
Your home may be repossessed if you do not keep up repayments on a mortgage