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Remortgaging: What You Need To Know
What is remortgaging?
Changing your mortgage, either to a new lender or to a better deal with your current lender, is known as remortgaging. In order to benefit from remortgaging your home, timing is critical. The below points should be considered before you decide whether a remortgage is right for you.
Is it a good time to remortgage?
The most important thing to consider when planning to remortgage is your current personal circumstances. If your circumstances match any of the below, then it could be a good time to consider remortgaging.
You want a better rate or your fixed rate is ending
If your fixed rate mortgage introductory period is due to end, or you are already on your lender’s standard variable rate, the chances are you could save money by remortgaging.
Concern that Bank of England base rates rising
The UK base rate is currently very low, at just 0.01%, however, a rise is always possible. A rise in the Bank of England base rate will influence all types of mortgage, so it’s worth considering your options in this situation.
Your property value has dramatically increased
When the price of your home rises, your loan to value amount decreases. This gives you access to better mortgage rates from most lenders, so it’s an opportune time to look at remortgaging for a better deal.
Your current mortgage terms won’t let you overpay
Mortgage overpayments can reduce your mortgage term and/or monthly repayments. If you’re looking to make overpayments, but your current terms don’t allow for this, you’ll find alternative lenders who do. Always consider any exit fees on your current mortgage, before making a decision.
You want to borrow money
Remortgaging can sometimes facilitate additional borrowing towards your home, for example, for home improvements. It can even be used for unrelated large purchases, such as a car or debt consolidation. You should bear in mind that this will not always be the cheapest option and consider a regular loan first, however.
You want a more flexible mortgage
Many modern mortgage deals include advantages such as payment holidays and offsetting your savings. Remortgaging can give you access to a more flexible mortgage, if desired.
You want to change your mortgage type
You won’t ordinarily need to remortgage in order to change your existing mortgage from an interest-only to a repayment mortgage. If your lender cannot offer this service, however, then remortgaging may be an option.
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When is remortgaging not a good idea?
You Don’t Owe Very Much On Your Mortgage
If you have £50,000 or less left until you pay off your mortgage, it’s unlikely you’ll benefit from remortgaging. The fees involved are likely to outweigh any savings.
You Have High Early Exit Or Early Repayment Charges
If there are considerable charges involved in leaving your current mortgage, they may negate the benefits of remortgaging. Always consider early exit or early repayment fees.
Your Financial Circumstances Are Worse
Your remortgage application is unlikely to be accepted if you’re worse off than you were when your original mortgage was approved. Recent adverse credit is also likely to affect your chances of acceptance.
The Value Of Your Home Has Fallen/ You Have Negative Equity
If your home has negative equity, which can be either due to a fall in property value, or if you’ve fallen significantly behind on your repayments, you will owe more than its current value. Lenders will not offer a remortgage when there is low or negative equity in your home.
You Already Have A Great Mortgage Rate
Whilst it’s a good idea to stay aware of other mortgage deals in the market, If you already have a particularly competitive rate, remortgaging is unlikely to benefit you.
What happens if I don’t remortgage when my deal expires?
When you choose not to remortgage at the end of your fixed-rate period, you’ll automatically transfer to your lender’s standard variable rate. Standard variable rates are not typically very competitive, so it’s likely switching to this rate will increase your monthly payments.
How do I prepare my finances ready to remortgage / Improve my chances of getting a remortgage?
It’s important to be aware of the amount of equity in your home prior to considering a remortgage, as this can affect your acceptance. You should also ensure that you still meet the affordability criteria, particularly if you are looking to borrow more.
A deposit is not required for a remortgage, but it can improve your chances that the lender will accept your application.
What fees are associated with a remortgage?
You can expect to pay similar fees as you did on your original mortgage, such as arrangement fees, legal fees and in some cases, additional valuation fees.
How can a Mortgage Broker help?
A Mortgage Broker can advise you of the best time to remortgage, based on your own circumstances. They also have a wide-ranging view of both high street and independent mortgage lenders in the market, allowing them to find the most suitable deal available to you.
Debt consolidation is not always the most suitable option, consoliated debts much be carefully considered. It will usually mean more interest over a longer repayment term and there may also be early repayment penalties on your current mortgage, you should think carefully before securing other debts against your home. There are other ways to manage debt such as free debt advice charities, you can find out more by contacting the Money Advice Service https://www.moneyhelper.org.uk/en/money-troubles/dealing-with-debt/debt-advice-locator these services may be more suitable for you.
Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
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