What is remortgaging?
Remortgaging is where you take out a new mortgage on a property that you already own. It can be to replace your current mortgage or to borrow money against your property. Homeowners usually re-mortgage to save themselves money, instead of reverting to their lenders higher Standard Variable Rate (SVR), but at the moment many are re-mortgaging to protect themselves against increases in interest rates.
Why should I remortgage?
Remortgaging could save you money
The most important reason to want to remortgage is to save yourself money. Usually, your mortgage is your largest financial commitment, so trying to save money on your mortgage will have a huge impact.
Often mortgages which offer the best rates only last a short time – perhaps for two or five years. Once this has ended, your lender will put you on their Standard Variable [interest] Rate (SVR) which, most likely, will be more expensive for you. If you know your current rate agreement is due to finish within the next three to six months, it is a good idea to speak with your Mortgage Broker to look for more competitive rates, and a mortgage product and lender that meets your current and future needs. This will prevent you being stuck on the lender’s SVR whilst you look for a deal.
The value of your home gone up substantially
Another positive outcome of re-mortgaging is if the value of your property has increased substantially since you first took out your mortgage then you are now in a lower loan to value (LTV) band and so may be able to secure lower rates. This is where speaking to an experienced Mortgage Broker is particularly helpful due to the calculations required.
You’re concerned about the trend in interest rates
There is a difference between the interest rate you pay on your mortgage and the Bank of England base rate that you read about in the newspapers and online. Check with your Mortgage Broker what is happening in the market to get a clearer idea of current rates and projected trends.
Why shouldn’t I remortgage?
You have a large fee if you repay your mortgage early
A lot of mortgages have an early repayment charge (ERC) if your repay all or part of your mortgage before the fixed period expires, which can be substantial. It is important to find out how much this is before moving your deal, since it could completely wipe out the benefits of remortgaging. It’s well worth rereading your original Mortgage Offer document to find out the cost of changing your mortgage to another deal. If you need help with this speak to a Mortgage Broker, he/she will advise you on what is happening in the rest of the lending market.
You only owe a small amount on your mortgage
In this instance it may not be worthwhile re-mortgaging once you take into account the fees and the benefits of changing rates. Again it is worth asking a Mortgage Broker to research the market for you but in some situations it is better staying with your current lender.
Your personal circumstances have changed
If your circumstances have changes this may impact your ability to pay the mortgage. Speak with your Mortgage Broker. They have experience of helping people with changes of circumstance and have a duty of care to give you best advice.
You have recently had credit problems
If you have forgotten to pay your credit card, mortgage, or another important regular bill you may have damaged your credit score. This may impact your ability to remortgage. Lenders check all your financial details before agreeing to lend and most require a good record of paying off your debts. If you have any concerns about your credit history it is best to speak to a Mortgage Broker, but in the first instance I highly recommend obtaining a copy of your full Credit Report not just your score – see https://www.checkmyfile.com/.
If you have any questions on remortgaging please contact us at 01892 315 135 or Daniel@FieldandMarshal.co.uk