Should you remortgage now?
Remortgaging is a process many homeowners consider as they approach the end of their current mortgage deal or when they believe better options are available. Given the ever-changing economic landscape, interest rates, and personal circumstances, it’s essential to evaluate whether now is the right time for you to remortgage.
This article will explore the key factors to consider when deciding whether to remortgage, what benefits you could gain, and how to ensure you get the best deal available and also up to £500 in cashback
Why Remortgage?
There are several reasons why homeowners choose to remortgage. Understanding these can help you decide if it’s the right move for you.
1. Saving Money on Interest Rates
One of the primary reasons to remortgage is to secure a lower interest rate. If interest rates have fallen since you first took out your mortgage, or if your financial situation has improved, you might qualify for a lower rate, which could significantly reduce your monthly payments and the overall cost of your mortgage.
2. Avoiding Your Lender’s Standard Variable Rate (SVR)
When your fixed or introductory mortgage deal ends, you typically revert to your lender’s standard variable rate (SVR). SVRs are often higher than the rates available on new deals. By remortgaging, you can avoid rolling onto a higher rate and potentially save a substantial amount of money.
3. Releasing Equity
If your property has increased in value since you took out your mortgage, remortgaging could allow you to release some of the equity in your home. This could be used for home improvements, paying off debts, or funding other major expenses. However, it’s important to consider that this will increase the size of your mortgage and potentially the length of time it takes to pay off.
4. Flexibility
Remortgaging can also provide an opportunity to switch to a mortgage that better suits your current needs. For instance, you might want to change to a deal with more flexible terms, such as the ability to make overpayments or take payment holidays, or you might want to fix your rate for a longer period for greater security.
When to Remortgage
Timing is crucial when considering remortgaging. Here are some key moments when it might be wise to explore your options.
1. End of a Fixed-Rate Deal
If you’re approaching the end of your current mortgage deal, it’s a good time to start looking at your remortgaging options. Most mortgage deals are fixed for a set number of years, often two, five, or ten. Once this period ends, you’ll likely move onto the lender’s SVR, which is usually higher than the fixed rate you were paying.
It’s advisable to start the remortgaging process around three to six months before your deal ends. This gives you ample time to shop around for the best deal and avoid paying a higher rate.
2. Interest Rate Predictions
Keeping an eye on interest rate trends can also help you decide when to remortgage. If rates are predicted to rise, securing a fixed-rate deal now could save you money in the long run particularly as you can secure your rate up to 6 months ahead and check for better rates in the meantime
3. Changes in Your Financial Situation
If your financial situation has improved, such as receiving a salary increase or paying off other debts, you may qualify for better mortgage rates. Similarly, if your credit score has improved since you first took out your mortgage, this could also open up better remortgaging opportunities.
How to Get the Best Deal When Remortgaging
Finding the best remortgage deal isn’t just about securing the lowest interest rate. Here’s what you should consider to make sure you’re getting the most suitable deal for your circumstances.
1. Compare the Overall Cost
While a low interest rate is important, it’s not the only factor to consider. You should also take into account any fees associated with remortgaging, such as arrangement fees, valuation fees, and legal fees. Sometimes, a mortgage with a slightly higher interest rate but lower fees can work out cheaper overall.
2. Consider the Loan-to-Value Ratio (LTV)
The loan-to-value ratio (LTV) is the percentage of your property’s value that you are borrowing. Typically, the lower the LTV, the better the interest rates you’ll be offered. If your property has increased in value or you’ve paid off a significant portion of your mortgage, your LTV will be lower, and you could qualify for a more competitive deal.
3. Check Your Eligibility
Before applying for a new mortgage, make sure you meet the lender’s criteria. This includes having a good credit score, stable income, and meeting the lender’s affordability checks. Some lenders may have stricter requirements, especially in uncertain economic times, so it’s important to ensure you’re likely to be accepted before applying.
4. Use a Whole-of-Market Broker
A whole-of-market mortgage broker like ChangeMyMortgage.com has access to a wide range of lenders and deals, including those that aren’t available directly to consumers. This can be particularly beneficial if you have specific requirements or if your circumstances are more complex. A broker can help you navigate the various options and find a deal that’s tailored to your needs.
The Potential Pitfalls of Remortgaging
While remortgaging can offer many benefits, it’s important to be aware of potential pitfalls.
1. Early Repayment Charges
If you’re still within the fixed-rate period of your current mortgage, remortgaging early could incur an early repayment charge (ERC). This fee can be significant, often amounting to a percentage of the outstanding loan balance. Before deciding to remortgage, you should calculate whether the savings from a new deal would outweigh the cost of the ERC.
2. Higher Monthly Payments
If you’re moving from an interest-only mortgage to a repayment mortgage, or if you’re releasing equity from your home, your monthly payments are likely to increase. It’s essential to consider whether you can comfortably afford these higher payments over the long term.
3. Extending Your Mortgage Term
While extending the term of your mortgage can reduce your monthly payments, it will also mean paying more interest over the life of the loan. This can increase the overall cost of your mortgage significantly. It’s important to weigh up the short-term benefits of lower payments against the long-term cost.
Conclusion: Is Now the Right Time to Remortgage?
Deciding whether to remortgage now depends on various factors, including your current mortgage deal, interest rate trends, your financial situation, and your future plans. If you’re approaching the end of a fixed-rate deal, it’s worth exploring your options to avoid moving onto a higher SVR. Similarly, if interest rates are low or your financial circumstances have improved, remortgaging could save you money and provide greater financial security.
For homeowners looking to ensure they’re on the best possible deal, ChangeMyMortgage.com offers a unique solution. As an independent, whole-of-market platform, ChangeMyMortgage.com provides an instant comparisons between your current lender and the best deals on the market. This ensures that you receive an impartial recommendation tailored to your specific circumstances. We are at hand to provide free mortgage advice and also up to £500 in cashback, making the decision even sweeter.
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*15 minutes is based on average completion time. Cashback is subject to completion of a mortgage through Changemymortgage.
