What is remortgaging?
Remortgaging is simply changing your mortgage deal. You can either change lenders or remain with your current mortgage provider to do this.
When should you remortgage?
The UK interest rates are currently incredibly low (0.1%), which means many lenders can currently offer very low rates. If any of the below apply, now is a sensible time to consider remortgaging.
Your current deal is ending or you want a better rate
If you have a fixed rate mortgage, when it ends, your provider will likely put you onto a default SVR (standard variable rate) of interest. On an SRV your repayment amounts can vary.
You don’t have to wait until your offer ends to consider other options. However, ensure you look into early repayment fees in your current contract.
The value of your home dramatically increases
If your home is valued at more than when you took out the mortgage, your LTV (loan to value) ratio will be lower. This should give you access to lower rates with most lenders.
There’s an impending change in the Bank of England’s base rate
Whilst this is currently only set at 0.1%, if plans arise for an increase, your mortgage repayments could be affected. It’s worth seeking advice before making changes.
You want to overpay, but your lender won’t allow this
If your financial circumstances improve, but your current lender won’t accept overpayments, remortgaging can help. Some mortgage terms allow for overpayments. It’s worth weighing this against whether your lender will charge an exit fee.
You want to switch from interest-only to repayment mortgage
Whilst a valid reason, you shouldn’t need to remortgage to do this. Most lenders will be able to make changes within your current mortgage to allow this to happen. It’s worth checking this before you consider remortgaging.
You want to borrow more or consolidate debt
If you’re looking to borrow for home improvements or a large one off purchase, remortgaging may be an option. This can be especially useful if your current lender won’t extend your credit.
You want a more flexible mortgage
Some mortgages allow you to take a payment holiday. This can be useful if you plan to travel or change jobs. There are lots of different flexible mortgage options. These usually come at the price of a higher interest rate, however.
What happens if I don’t remortgage after my deal expires?
You don’t have to remortgage.The only change if you don’t remortgage should be a transfer to the lender’s standard mortgage product with SVR. This can mean you are paying more than you need to.
When is remortgaging not a good idea?
Your remaining debt is small
If you owe less than £50k on your mortgage, it’s unlikely you will benefit from remortgaging. Often the fees will negate any interest savings.
You have high early repayment fees
Again, if you have a large fee to pay for an early exit, you are unlikely to benefit from switching. In some cases this may even cost you more.
A change in circumstances
If your financial circumstances are worse than when you took out your mortgage, it’s unlikely you’d be accepted for a remortgage. This is also true if you’ve had credit problems.
Your home’s value has dropped or you have low equity
Unfortunately if the value of your home drops, your LTV will be higher. This will result in low or even negative equity (you owe more than your home is worth). No lender will offer a remortgage in these circumstances
You’re already on a great rate
If your mortgage deal is already one of the best available, it’s unlikely you will benefit from remortgaging. It’s worth keeping a keen watch on the market, however, to ensure this is still the case.
How do I Improve my chances of getting a remortgage?
Much like your original mortgage application, you should ensure your credit rating is strong and your finances are in order. It can be beneficial to offer a deposit.
What fees are associated with a remortgage?
Although lower than with a standard mortgage application, there are still a number of fees involved in remortgaging. Arrangement, booking and legal fees are all common, whilst some lenders will also require valuation fees.
How can a mortgage broker help me to remortgage?
There are a plethora of remortgage options available and a mortgage broker has the expert knowledge to find the right one for your circumstances.