A new year ringing in can often mean a list of new things are added to your to-do list, and if yours includes re-mortgaging just after dry-January and clearing that cupboard you promised yourself you’d do before Christmas then you might want to make note of this advice from Money Saving Expert.
The main reason that you might want to remortgage is to save money. And this can be big money.
Your current deal is about to end.
Many of the best mortgages only last a short time – often two to five years – the typical length of time offered on a fixed rate, tracker or discount mortgage.
When it comes to an end, your lender will put you on its bog standard variable rate (SVR). It’s likely to be higher than your old interest rate and higher than the best buys available. If so, you want to be ready to remortgage to a cheaper rate. Start looking around 14 weeks before your rate ends.
You want a better rate.
If you are tied into an initial deal then you might have to pay an early repayment charge which can be huge, often 2-5% of your outstanding loan. Plus, there is usually a small exit fee (it might call it an ‘admin fee’ or a ‘deeds release fee’) when you repay any mortgage.
This doesn’t mean you shouldn’t consider it as the savings can be huge (especially if you have a large amount of mortgage debt). You just need to do your sums before taking the plunge.
Your home’s value has gone up…a lot.
If the value of the property has risen rapidly since you took out your mortgage, you may find you’re in a lower loan-to-value band, and therefore eligible for much lower rates. Again, you need to do your sums but it’s definitely worth a look.
You’re worried about interest rates going up.
Whoa there! Before you panic, you need to check what is meant by rates going up. If it’s the Bank of England base rate that is predicted to go up, this may affect your mortgage payments directly, depending on the type of mortgage you have. If it’s the rates that new customers are being offered, then this doesn’t automatically mean yours will be affected.
You want to overpay & your lender won’t let you.
Perhaps you’ve had a pay rise or maybe you’ve inherited some money. You now want to pay extra but your current deal won’t let you or it will only let you make a small overpayment.
A remortgage will allow you to reduce the loan size and potentially get a cheaper rate as a result. But watch out for any early repayment charges or exit fees you face, and compare this to how much you’d save with the new, lower mortgage.
You want to switch from interest-only to repayment mortgage.
You shouldn’t actually need to remortgage to do this, your lender should be happy to make the change for you.
You can even change part of the loan to capital repayment and leave some on your interest-only deal, which is particularly useful for anyone with an underperforming endowment mortgage which is expected to result in a shortfall at the end of the term.
However, it’s a totally different story if you want to change from capital repayment to interest only – expect your lender to be difficult if you try to do this.
You want to borrow more.
Perhaps your current lender has said no to lending you extra money or the terms it’s offering aren’t very good. Remortgaging to a new lender might enable you to raise money cheaply on low rates. But remember to take all the fees into account to see if it really is cheaper than other forms of borrowing.
The new lender will ask you what the extra money is for. Surprisingly, it is likely to be more comfortable with you borrowing the money for a new car than for business purposes. Not so surprisingly, it won’t want to lend you money to start a new business….
The most commonly acceptable reasons to raise money are for home improvements and paying off other debts. Just be prepared for your lender to ask for evidence if you are borrowing a large amount, e.g. builder quotes, or proof that you have paid off the debts.
You want a more flexible mortgage.
Maybe you want to be able to miss a payment. Changing jobs, going back into education, going travelling – whatever the reason, there are mortgages which will let you take payment holidays.
Or maybe you’ve been tempted by different, whizzy mortgages which combine your savings or current accounts with your mortgage.
Whatever flexibility you want in a mortgage, chances are it’s out there. But remember products don’t offer these twiddly bits for free. Expect to pay for flexible features with a slightly higher interest rate. So don’t be tempted to go for bells and whistles unless you will actually use them.
If it sounds like remortgaging could be the right move for you, you want to start the search 14 weeks before you want to remortgage.
If you’d like some help re-mortgaging we have a team of independent financial advisors who can help you, click here to request a call back