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All You Need to Know About Remortgaging
What is Remortgaging?
Remortgaging is simply changing your current mortgage deal. There are many reasons that you might want to change your mortgage, from saving money to buying a larger home. You can choose to either change your lender or to change your mortgage and stay with the same lender, both are considered a remortgage.
When is a good time to Remortgage?
In broad terms, based on the UK economy, now is a good time to remortgage. The Bank of England base rate of interest is currently very low (March 2021) at just 0.1%. The important thing to consider, however, is whether or not your circumstances are conducive to a remortgage.
If any of the following criteria apply to you, then you could be the ideal candidate for a remortgage:
Your fixed rate deal is due to end
When you take out a fixed rate mortgage, the interest rate has an introductory fixed term, which is lower than the lender’s standard rate. When this term ends, you’re automatically swapped onto the lender’s SVR (standard variable rate). This will be more than you were paying before.
You think interest rates will rise
Whichever type of mortgage you have, your monthly payments are likely to change with the UK base rate. Therefore if you think they’re due to rise, you might benefit from remortgaging.
Your home rises considerably in value
If the value of your home increases dramatically, your LTV (loan to value) ratio will fall. A lower LTV gives you access to lower mortgage rates from most lenders.
You’re not allowed to make overpayments
Making overpayments on your mortgage can be beneficial if you can afford to do so. Unfortunately, whlist some mortgages allow an annual overpayment, the terms of many mortgages prohibit this, so remortgaging is a good option if you want to make overpayments, but can’t.
To borrow more money
Remortgaging can sometimes be a good way to borrow additional funds for high value items or for home improvements. You can even use a remortgage to consolidate your debts, but you should bear in mind that it’s not always the cheapest way to borrow money. Our team will provide you with a bespoke service to make sure we take everything into account. There are lots of factors to consider such as securing your debt against your property vs. the impact of having unsecured debt; as well as comparing the benefits of borrowing money over a long term vs. borrowing money over a shorter term.
You want flexible mortgage benefits
Many mortgages now have flexible benefits built into them. For example, allowance of payment holidays, or the ability to offset savings against mortgage interest. Remortgaging is a good option if you wish to benefit from this type of flexible add-on.
When is Remortgaging not a good idea?
Whilst remortgaging can benefit some, it really does depend on your personal circumstances. If any of the below apply to you, remortgaging will not currently be a good option.
To change your mortgage type
You shouldn’t need to remortgage in order to change your existing mortgage from an interest-only to a repayment. Most lenders should offer this option to all customers.
Your mortgage has high exit fees
Some mortgages will have early exit fees or an early repayment charge. If these fees are high, they often outweigh the benefits of remortgaging.
You have a great deal
Whilst you should always look out for better offers, if you already have a competitive mortgage rate, you may not benefit from remortgaging. The cost of remortgaging will negate smaller interest savings.
You are close to paying off your mortgage
If you owe less than £50,000 on your property, the fees involved with remortgaging will likely outweigh any savings.
Your financial circumstances have declined
If your financial situation is worse now than it was when you took out your mortgage, your application for a remortgage is unlikely to be accepted. This is also the case if you have experienced recent adverse credit.
Your property has low equity
If your property has decreased in value, your LTV will be higher. This means you will have very little or possibly negative equity (you owe more than your home is worth). Lenders will not accept a remortgage application under these circumstances.
What happens if I don’t Remortgage after my deal expires?
If you choose not to remortgage you’re automatically transferred onto your lender’s SVR.
Whilst it’s very likely your monthly repayments will increase, there is no legal obligation to remortgage.
However, there is no reason to be paying more for your existing mortgage when you could be saving money and/or taking years off your mortgage term by remortgaging.
What fees are associated with a Remortgage?
Remortgaging has similar fees to a standard mortgage, such as broker fees, arrangement fees and legal fees. The reason for your remortgage can also have an impact on the fees.
A deposit is not required, but it can improve your chances of acceptance, especially when looking to move to a higher value property.
How can a mortgage broker help?
Deciding whether now is the right time for you to benefit from a remortgage can be difficult. A mortgage broker can offer you experienced advice based on your individual circumstances. They can also ensure you approach those lenders who are most likely to accept your application.
Another benefit of using a mortgage broker is accessibility. Some of the deals that mortgage brokers have access to are not available directly to customers. It’s, therefore, always worth checking whether they can help you obtain a better deal.
Remortgaging for a Better a deal
Standard Variable Rate (SVR) are our least favourite words, here at The Mortgage Mum. If you’re on your lender’s SVR then the chances are, you’re paying more mortgage interest than you need to.
What is a Standard Variable Rate?
Most mortgage applicants choose a mortgage with a fixed rate deal, meaning they have a lower interest rate, which remains the same for an introductory period of two to five years. Once this period comes to an end, you will automatically be transferred onto your lenders standard variable rate of interest.
Each mortgage lender sets their own standard variable rate of interest and can choose to change it at their own discretion. This means that your mortgage payments can change at any time. Standard variable rates are higher than those on a fixed rate mortgage,and they will ordinarily be upwards of 4%. Whilst it’s a good idea to keep track of your introductory period, your lender should always let you know that you have transferred onto their SVR.
Having a Conversation About Mortgage Renewal
If you end up on your lender’s SVR, the likelihood is you haven’t had a conversation about renewal of your mortgage. There are many ways that you can look into remortgaging to save money on your SVR. A good starting point could be an online mortgage calculator, which can give you an idea of what type of mortgage deals are available. You can also speak to your existing lender or visit any high street lender or Mortgage Broker for advice.
There are a plethora of mortgage options available and these will undoubtedly have changed since your original mortgage application. A hike in mortgage interest will be much more significant than it is for your insurance policies. You can also expect your monthly repayments to rise more than once on a SVR, as the lender can choose to raise their rates at any time.
What’s The Problem With an SVR?
Essentially paying your mortgage at an SVR could cost you more. There is no reason to be paying more for your existing mortgage when you could be saving hundreds of pounds and/or taking years off your mortgage term by remortgaging.
There’s also a chance that your house could have gone up in value, meaning your equity will have increased. This gives you access to more attractive mortgage deals and you will also likely have the opportunity to borrow more money, if you need to.
Why Are The Mortgage Mums passionate about solving this problem?
Unfortunately, lots of people don’t realise that there are better options available to them and we don’t want anyone to drop onto the SVR and pay more than they need to. People are busy with work and family issues, meaning that the subject of mortgage payments will often be overlooked.
Another common issue is that there tends to be a stigma around frugality, which means that some people are embarrassed to ask about their money saving options. We don’t want anyone to feel embarrassed to have a conversation that could potentially improve the next 25 years of their life.
Money is a very personal subject, which can often be masked by shame, especially where saving money is concerned. We want to offer people a safe, discreet and judgement free environment to discuss their finances.
How Can You Help People With Their Remortgage?
At The Mortgage Mum we’re everyday women, working from home to make our client’s lives simpler. We want to normalise conversations about money saving and mortgages, cutting through the intimidating jargon to provide a clear and concise explanation to everyone.
We will take the time to fully re-assess your circumstance and your mortgage terms to see how you can benefit most from remortgaging your home. We don’t work standard office hours, so we can work around whatever your lifestyle dictates.
How Long Does it Take?
You’d be surprised how quickly we can review your current mortgage and organise your remortgage for you. In some cases, such as product transfers you can be paying less in just a few days, more complex mortgages can take between four to six weeks.
Who Can You Help?
We like to think that anyone would feel confident to approach us for our help. We’ve helped a wide range of people, such as families, young couples, single parents, landlords and busy emergency workers on a tight schedule.
At The Mortgage Mum our service is quick and efficient, so if that fits in with your lifestyle, or you simply don’t want a long, stuffy appointment at your bank, we’re the choice for you!
What’s the Next Step?
Your first step is to book a chat with us, either via our website or you can email us. We will call you to either set you up on our portal or to carry out the consultation via phone, whichever you are more comfortable with.