When should you remortgage your home? A mortgage is normally a person’s largest financial commitment, so streamlining the debt can produce the biggest savings which can be £1,000s each year. Don’t limit yourself to shopping around for the cheapest utilities or mobile phone contract, shop around for the best mortgage deals too!
This guide will help you answer the question many homeowners face – ‘when should you remortgage your home?’- and identify what to look out for before you do. As a general rule, you should think about remortgaging when your current introductory mortgage rate is close to ending, ideally 3 – 6 months beforehand.
My Current Mortgage Deal Is Coming to an End
When it comes to an end, your lender will put you on its Standard Variable Rate (SVR). That’s probably going to be higher than your old interest rate and higher than other best buys available. So, you need to be ready to remortgage at a cheaper rate. Delays due to Covid-19 have meant it now takes longer to remortgage, start looking around three to six months before your rate ends.
Reasons to Remortgage Your Home
There are numerous reasons that you may be considering remortgaging your home, including:
1. I want a better rate mortgage
If you are tied into a deal, you might have to pay an early repayment charge which is often 1-5% of your outstanding loan. Be aware though, there is normally a small exit fee too. It might be called an admin fee or a deeds release fee when you repay any mortgage.
You will need to do your sums before making any decision. You could still consider a remortgage, even with the fees, as the savings can be huge, especially if you have a large amount of mortgage debt.
2. My home’s value has risen
If the value of your property has risen quickly since you took out your mortgage, you may find you’re in a lower loan-to-value band, and therefore eligible for lower rates. Again, you need to do your sums, but it’s certainly worth investigating.
3. I want to overpay and my lender won’t let me
For whatever reason, and if you can afford it, you may want to overpay your mortgage, but your current deal won’t let you or it will only let you make a small overpayment.
A remortgage might allow you to reduce the loan size and potentially result in a cheaper rate as well. As mentioned previously, watch out for early repayment charges or exit fees, and compare this to how much you’d save with the new, lower mortgage. Offset mortgages maybe another option here too.
4. I want to borrow more
Perhaps your current lender isn’t offering favourable terms on borrowing more money, so remortgaging to a new lender might enable you to raise money cheaply at low rates. But take all the fees into account: there may be other, cheaper forms of borrowing extra money.
Be prepared for your lender to ask for evidence of why you want to borrow more money, such as quotes for home improvements etc.
Why Shouldn’t I Remortgage?
There may be some circumstances where remortgaging isn’t the best option for the following reasons:
1. Your debt is small
When your mortgage falls below a certain amount, usually around £25,000, it may not be worth switching your lender as you are less likely to make any savings if the fees are high. Some lenders won’t take on a mortgage of below £25,000; the smaller the mortgage the worse effect of any fees you would need to pay become.
2. Your early repayment charge is large
This is a no-brainer. If it would cost too much to free yourself from your current deal, then wait, do your homework, and be ready to move as soon as your current deal ends.
You have nothing to lose by asking your current lender to let you switch to another of its deals in a product transfer but most wont allow you to pay the early repayment charge to do so early. Many lenders will allow you to reserve a new rate 2 – 5 months early, with the rate starting at the point the existing one finishes, hence no early repayment charge being due. You might not get its top-of-the range deal, but it may be better than the one you’re currently on. You should compare other options/lenders at the same time off course, to maximise the savings to be had. A product transfer with your existing lender is something we can help with, as well as shopping around with other lenders for you too.
3. Your circumstances have changed
Financial positions can change at any point since you took out your current mortgage – one of you has stopped working or you have become self-employed.
Since 2014, strictest mortgage rules mean lenders must see evidence of your income. If you no longer fit their criteria, one alternative might be to check the best deal your existing lender will give you with a product transfer, although other amendments to the mortgage might trigger affordability checks with them too. Talk to us we can help.
What Does Remortgaging Involve?
Before you start thinking about when should you remortgage your home, it is important to think, what does remortgaging involve? Firstly, it’s important to check your credit report and determine how else to boost your mortgage credentials. Remortgaging requires effort – even more so since coronavirus – but could give you major savings in the long run.
Here at Stuart Brown Mortgage Services we can take all the leg work out of this process for you and look for those hard-to-find deals that can be difficult to source. We can find the best mortgage available for you based on your personal financial situation and apply on your behalf. We have access to mortgage deals not available directly to the public. Our services will help save you time and stress by telling you which lenders are likely to accept you and can speed up the process by dealing with the paperwork, even if it is with your current lender.
We have expert knowledge of the mortgage market and will be able to recommend deals that suit your personal situation. With access to software that allows us to search mortgage deals, we will be much more efficient than you could be by yourself and will guide you through the process. Also, by using our services, you are obtaining a full advisory serves from us to make sure the mortgage is most suitable. This option isn’t available if you apply directly without taking advice.
So, for advice on your remortgage, get in touch with us to take the stress out of the process
Beds 01525 877650 or Herts/Bucks 01442 252040 or Mobile 07710 770969
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage.