Remortgaging

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What you need to know about Remortgaging

What is remortgaging?

If you want to change the mortgage that you currently have in any way, then you will usually need to remortgage. This could be changing lenders or simply changing to a better deal with your current lender.

When is a good time to remortgage?

As the UK interest rates are currently very low, at just 0.1%, it’s a great time to consider remortgaging A low base rate often leads to excellent mortgage rate availability. The most important thing to consider when planning to remortgage, however, is your current personal circumstances. Below are some examples of good times to apply for a remortgage. Your fixed interest rate is ending Fixed rate mortgages will have an introductory period which offer a fixed rate of interest. Once this term ends, you revert to the SVR (standard variable rate) of interest, set by your mortgage provider. You want to change your mortgage type If you want to change your existing mortgage from an interest-only to a repayment mortgage, this can usually be arranged by your lender without the need for a remortgage. Bank of England base rates are rumoured to be rising Whilst the UK base rate is currently very low, a rise is still possible. Your monthly repayments can be affected by this, so it’s worth looking at other deals, should this happen. Your property value has risen by a lot A lower LTV (loan to value amount) gives you access to better mortgage rates from most lenders. If your home has risen in value since taking out the mortgage, your LTV will have fallen. This is a great time to see if you can find a better deal.

Your current mortgage terms won’t let you overpay

Making overpayments on your mortgage can reduce both the term and/or future repayments. Many mortgage terms and conditions prohibit this, however, so it’s worth checking yours. You will be able to find alternative lenders who offer the facility to make overpayments. Do bear in mind, though, that your current mortgage may have large exit fees.

You want to borrow more money

If you need a loan for home improvements, a large purchase or debt consolidation, remortgaging is a potential option. Remember to weigh up the costs against a regular loan first, however.

You want a more flexible mortgage

Perhaps you’ve noticed a flexible mortgage with advantages such as taking a payment holiday. It may be worth remortgaging to obtain this type of flexible benefit.

When is remortgaging not a good idea?

You have high early exit or repayment fees

If the early repayment charges on your current mortgage are very large, they may outweigh any benefits you’ll get from remortgaging.

You already have a great mortgage rate

It’s always wise to keep your eye on the market for a better mortgage deal. If, however, you find that you already have one of the best rates available,remortgaging is unlikely to benefit you.

Your remaining debt is very small

If you only have £50,000, or less left to repay on your mortgage, then it’s unlikely to be worth remortgaging. At this point in your mortgage term, the fees would outweigh any potential savings.

Your financial circumstances are worse

If, financially, you’re worse off than you were when your original mortgage was approved, an application for remortgage is not likely to be accepted. This is also the case if you have had adverse credit, since the original application.

You have low or negative equity in your property

Unfortunately, if the market changes, it is possible for your home to fall into negative equity. This means that your home is worth less than when you bought it, so you owe more than its current value. A lender will not offer a remortgage when you have negative or very little equity in your home.

What happens if I don’t remortgage after my deal expires?

If you decide not to remortgage, you will simply transfer to your lender’s standard variable rate. SVRs are typically not very competitive and will usually lead to higher monthly repayments.

What fees are associated with a remortgage?

Much like a first mortgage,the lender charges arrangement, booking and legal fees for a remortgage. Sometimes you’ll also need to pay additional valuation fees. You won’t have to provide a deposit for a remortgage, but it can improve your chances of acceptance if you offer one.

How can a mortgage broker help?

A mortgage broker has access to a full market view of the deals available to you. They can advise you when the best time to consider a remortgage is, based on your own personal circumstances and current mortgage status. Using a mortgage broker can also ensure that you choose the lender most likely to accept your remortgage application and save you money.

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it. 

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