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Mortgage Advice For Remortgaging
Martin Dennis breaks down the most common questions on Remortgaging
What is Remortgaging?
Remortgaging is the process whereby you make changes to the mortgage you currently have. It could be changing your lender or trying to obtain a better deal from your current lender. There are a wide range of reasons that you may want to consider a remortgage, but the most important factor in benefitting from remortgaging is timing.
If you’re just looking to change your existing mortgage from an Interest-only to repayment, most lenders can arrange this without the need to remortgage.
When should I consider a remortgage?
In order to benefit most from remortgaging, you should do it at a time when your personal circumstances align with the situations below:
Your fixed interest rate is ending
If you have a Fixed-rate Mortgage and your introductory period is due to come to an end, you will ordinarily revert to the Standard Variable Rate of interest, set by your mortgage provider.
Bank of England base rates are rumoured to be rising
If you have any type of mortgage other than a fixed-rate, then your monthly repayments can be affected by fluctuations in the Bank of England base rate of interest. Whilst it’s currently at a very low rate, changes do occur, so it’s worth monitoring this for expected increases.
Your property value increases significantly
If the value of your home has risen since you took out your mortgage, the Loan to Value ratio on your loan will have fallen. This provides you with an opportunity to take advantage of more competitive interest rates that are available to those with a lower Loan to Value mortgages.
Your current mortgage terms won’t let you overpay
There are long term benefits to making overpayments on your mortgage if you’re able to, such as the ability to pay off your mortgage earlier than intended. Unfortunately, many mortgages prohibit this within their terms and conditions. It’s worth looking at other lenders who allow for overpayments, however, you should keep in mind exit fees, which are likely to be due on your existing mortgage.
To increase your borrowing
Remortgaging can sometimes provide a finance option to those looking for additional funds for home improvements, a large purchase, such as a car or debt consolidation, for example. It’s important, however, to consider the costs against a standard loan, which could be a cheaper option.
For flexible mortgage options
Some mortgages come with advantages such as the ability to take a payment holiday. If you don’t have this type of flexible option in your current mortgage terms, you could consider remortgaging to benefit from a mortgage product that does.
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When is remortgaging not a good idea?
You have high early exit or repayment fees
In some cases the early repayment charges you would incur from leaving your current mortgage will outweigh the benefits of remortgaging.
You already have a competitive rate
Whilst it’s sensible to monitor the market for more attractive mortgage deals, when you already have a highly competitive rate, remortgaging is unlikely to provide you any benefits.
Your remaining debt is very small
When you have £50,000 or less to repay on your mortgage, the fees involved with a remortgage are likely to outweigh any of the potential savings you might have made.
Your financial circumstances have declined
A remortgage application involves reassessment of your affordability and credit score. Therefore, if your financial circumstances or credit rating has declined since your original application, you are unlikely to be accepted for a remortgage.
You have negative equity in your property
Negative equity, which means you owe more than your property’s current value, can occur if the property market declines or if you fall behind with your monthly payments. Lenders will not offer a remortgage under these circumstances.
What happens if I don’t remortgage after my deal expires?
There is no obligation for you to remortgage, however, you will automatically transfer to your mortgage lender’s Standard Variable Rate if you don’t. The lender’s Standard Variable Rates is not typically competitive and will lead to higher monthly repayments than when you were on a fixed-rate.
What fees are associated with a remortgage?
As remortgages require a new application, arrangement fees, booking fees and legal fees will all be due. You may also have to pay new valuation fees, particularly if the market has changed or you are moving.
Deposits are not ordinarily needed to remortgage, however, it can improve your chances of acceptance, especially where your equity is less substantial.
How can The Mortgage Company brokers help?
At The Mortgage Company, we can help you establish the best time to consider a remortgage, based on your individual circumstances and existing mortgage status. We also have access to a broad spectrum of mortgage lenders and products from both the high street and independent mortgage market.
As well as helping with the administration of your mortgage application, we can save you the money, time and stress of failed remortgage applications, by directing you to those lenders who will be most accommodating to your specific needs.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.