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If you change your mortgage, to take advantage of an attractive deal, this is known as Remortgaging. You can either remortgage with a new lender or stay with the same lender and take a different mortgage deal, the latter is sometimes referred to as a product transfer or product switch.
If you’re looking to simply change your existing mortgage from an interest-only to a repayment mortgage, most lenders are able to do this without the need to remortgage, however.
When is a good time to remortgage?
Finding the optimum time to remortgage is often key to maximising your benefits from the change. Whether or not it’s a good time for you will depend on your individual circumstances. Below are some examples of circumstances where remortgaging can be beneficial:
Your current fixed rate is ending
When you take out a fixed-rate mortgage deal and your introductory rate ends, you’ll transfer automatically to your lender’s Standard Variable Rate of interest.
This rate is set by your mortgage provider and will be higher than fixed rates, meaning your repayments will rise.
You’re concerned about interest rate rises
The UK base rate is currently very low, however, a rise is always possible. You could see changes to your monthly payments if it does rise (or fall) with any type of mortgage that’s linked to the base rate. Fixed-rate mortgages, however, will not be affected by such a rise and therefore will only arise once the fixed term is over.
The value of your home rises considerably
When your home rises in value, the loan-to-value rate on your mortgage decreases. This gives you access to more competitive mortgage rates from most lenders, so it’s a good time to see if you could save money.
You’d like to make overpayments, but your mortgage terms don’t allow it
Making overpayments on your mortgage can reduce the term of your mortgage and/or your monthly repayments in the long term. Unfortunately, some mortgage terms prohibit overpayments, so it’s worth checking your terms.
If you are not able to make overpayments, it’s possible to find mortgages that will allow for this, however, you should always consider early exit fees on your existing mortgage.
You want to borrow more money
Remortgaging can sometimes be a good way to increase your borrowing in order to carry out home improvements, make a large purchase or even consolidate debts. It’s wise to seek advice, however, as this will not always be the cheapest option for a loan.
You want a more flexible mortgage
Many mortgages now have flexible aspects to them, such as the ability to take a payment holiday or offset your savings against the mortgage interest. If you’re looking for this type of flexible benefit, but your current mortgage doesn’t include them, it may be worth remortgaging for a deal that better suits your needs.
When is remortgaging not a good idea?
You have high early exit fees or early repayment charges
Most mortgages will have an early exit and/or early repayment fees in the terms. If these are very large on your existing mortgage then they often outweigh the benefits of remortgaging.
You already have a great mortgage rate
It’s always worth keeping an eye on the mortgage market, however, if you find that your current deal is one of the most competitive out there, it’s unlikely to be worth remortgaging.
Your remaining debt is very small
If you have £50,000 or less left to pay until you pay off your mortgage, then remortgaging is unlikely to benefit you. The fees could outweigh any interest savings you would make at this point in your mortgage.
Your financial circumstances worsen
If your financial situation has declined since your original mortgage application, particularly if you’ve incurred adverse credit, your application is unlikely to be accepted by most lenders.
You have low or negative equity in your property
Negative equity is when you owe more than your home is currently worth and is usually a result of a crash in the housing market. Lenders will not offer remortgages to those with little or negative equity.
What happens if I don’t remortgage after my deal expires?
Whilst you are under no obligation to remortgage, if you choose not to, your mortgage will transfer to your lender’s Standard Variable Rate, increasing your monthly payments.
What fees are associated with a remortgage?
Remortgaging is similar to a standard residential mortgage application and will include the payment of arrangement, booking and legal fees, and in some cases, valuation fees
You won’t need a deposit in order to remortgage, although it can improve your chances of receiving an offer.
How can a Mortgage Broker help?
As choosing the right time is such an important aspect of remortgaging, our Mortgage Brokers will take an in-depth look at your individual circumstances and advise you whether now is a good time for you.
At Heritage, we have access to a wide range of mortgage deals from both high street and independent lenders, that you may not find on the open market. We can help you choose the lender who both offers you a competitive deal and is most likely to accept your application.
Making overpayments on your mortgage can be really beneficial, but unfortunately not all mortgages allow this.
It’s possible to find mortgages that allow repayments, so you could consider remortgaging to one, keeping in mind early exit fees on your current deal. For further advice, speak to one of our advisers today.