If you are a homeowner and have a mortgage you are currently paying off, remortgaging is something you should be aware of, and prepared to put to good use. There are many good reasons to consider changing your mortgage, whether it’s to fund something important in an affordable way, or simply to get the best deal for your situation.
Below I run through everything you need to know about remortgaging your property, as well as when not to:
Why Should You Remortgage?
There are three main reasons that you might want to consider a remortgage on your property
1. To save money
If it’s been a while since you took out your current mortgage and the rates have changed, you could save money by finding a cheaper deal. In order to assess whether a move is worth making, make sure you factor in all the fees and charges associated with moving your mortgage.
2. To get a more fitting mortgage
Maybe when you bought your home, you were forced to pick a particular sort of mortgage due to finances. If your situation has changed, you could switch to a new type of mortgage to pay it off faster, or maybe to keep your payments more predictable from one month to the next.
3. To release capital
If you have some equity in your home, you could release some of its capital value to fund lifetime choices. This may be a home improvement, to consolidate other debts or for a special occasion such as a wedding. This is only a good idea if you are either unable to get the money another way, or if you are planning to make changes to the property which will increase its value; such as an extension or loft conversion.
Whatever the reason you’re thinking about a remortgage, it’s crucial to get your timing right.
Remortgaging At The Right Time
Ideally, you should watch out for better mortgage deals all the time if you aren’t currently locked into a deal with your provider. There are regularly new offers coming onto the market, and as long as the fees aren’t too high and your credit is good, it’s a good idea to grab these offers when you see them appear.
In order to avoid overpaying on a poor mortgage deal, you should aim to review your situation at least once a year. If you are on a discounted deal for a fixed amount of time, you should aim to conduct a review when that period comes to an end. It’s also a good idea to keep an eye on interest rates, because when these change, so will the competitiveness of your current mortgage.
If you are remortgaging to make savings, the rewards can be substantial. If you owed £175,000 and were currently on a 5% deal, you could manage to find a 3% offer to switch to. In this example, your monthly payments would reduce from £1,115 to £971, saving you around £1,728 per year depending on the fees involved.
It’s a good idea to start looking for a mortgage offer around 3 months before your current deal ends, mortgage offers are guaranteed for this amount of time so it gives you plenty of time to shop around. Don’t forget to speak to your current provider – they may well be able to offer you an attractive deal to keep your custom.
When Not To Remortgage
There are some times when remortgaging really does not make sense. For example:
- When you own less than 10 per cent of your home: You are unlikely to get a good deal, if any offers at all.
- If your equity has shrunk: Houses can depreciate as well as increase in value, so if your equity has diminished, you’re better off sitting tight unless your current lender has a better offer for you.
- If you have a poor credit history: If you’ve got into unmanageable debt since taking out your mortgage, or have missed payments on credit cards or loans, you may find it difficult to get any sort of affordable mortgage.
- When you have a very small mortgage: If your mortgage is under around £50,000, you are less likely to be able to make a saving when you take into account the fees.
- If you’re locked into a poor deal: If your current mortgage has a hefty early repayment charge, it may become uneconomical to switch before the locked period ends.
- If you’re on an amazing deal already: If you’re one of the lucky ones who has managed to snag a rate beating deal on your mortgage, why change it? Keep an eye on offers though, as things do change quickly and, in future, a remortgage could do you good.
If you’re considering remortgaging it’s always advisable to take some advice and run through the various scenarios that might impact on this decision. Speak to your current mortgage provider, have a chat with a friendly mortgage broker and keep your eyes peeled for great offers!