With interest rates attracting headlines and the cost of living at the forefront of our minds right now, there’s a chance you’re already thinking about remortgaging. Even if you’re not, it’s possible that you could make significant savings by remortgaging – now more than ever.
Remortgaging is the process of taking out a new mortgage on your existing property, either to replace your current mortgage, or to borrow more money against the value of the property. There are a number of reasons it could be a good time for you to remortgage, but it’s not always beneficial, so timing is key and there are some important factors to consider. We’ve put together some of the most important to get you started in this blog post.
Shop around
It may feel quicker and easier simply to remortgage with your current lender (known as a product transfer), but there’s a good chance you’ll miss out on better deals if you don’t shop around. Just like when renewing things like insurance, you can often save money by comparing deals between different providers. This may take some time and involve some effort, but it will likely pay dividends. Much of the work can be taken on by a broker like WMG, who should be able to find you an even better deal than you would on your own, as they will have access to products not available to the public.
Get the timing right
The best time to start considering remortgaging is around 6 months before your current deal comes to an end. If you have a fixed rate mortgage, that rate is probably only fixed for a period of two to five years, depending on how much you borrowed at the start, how long you wanted the mortgage to last overall, and other factors the lender will have taken into account.
Once that fixed rate period ends, your lender will put you onto their standard variable rate (SVR) which will likely be significantly higher than the fixed rate you signed up for. This is why it’s important to start shopping around for a new deal, in the hope that by remortgaging you can get a new deal with a fresh fixed rate period that will guarantee you a favourable rate for the next few years.
It’s a good idea to start looking around 6 months before your deal ends, since it can take a while to complete the process for your remortgage and you’ll want to avoid any delays which will mean paying the SVR in the interim.
Make yourself attractive to lenders
When you start making applications for a remortgage, lenders will begin the process of calculating the potential risk of offering you a mortgage. To do this they’ll ask you questions about your income and outgoings just like when you applied for your initial mortgage, as well as running credit checks.
Your personal credit report contains information about credit cards, loans, overdrafts and direct debits and illustrates how reliable a borrower you are. A good credit report can help show a potential lender that you’re a low risk and therefore help them to make the decision to offer you a great mortgage deal, whereas a weaker report may mean you have a more limited range of offers. Thankfully, there are things you can do to improve your credit score, from simple tasks like ensuring you are registered to vote, to using a credit card and paying it off in full each month. Have a look at our guide to improving your credit score here.
Check your property’s value
The value of your property will of course have been taken into account when you got your initial mortgage, and will again when you remortgage. If the value of your property has risen considerably since you took out your original mortgage, this may mean you’re now in a lower loan-to-value (LTV) band, and therefore eligible for lower rates.
However, if your property’s value has dropped, you could now be in a higher LTV band than your original mortgage was based on, so it may be better to wait to remortgage until your property value improves. You can usually get an estimate for your property’s value online, or most estate agents will visit your property to give a valuation.
Do you want to make big changes?
Whilst the end of a fixed rate period is the most common time to start looking to remortgage, there are other times it can be beneficial to shop around for a new deal. If your circumstances have changed and you’d like to start paying more off your mortgage so that you can pay if off sooner, you may find that your current product won’t allow you to do so, or there are restrictions and penalties. It could also be that you’ve been on an interest-only mortgage but would like to start repaying what you’ve borrowed, so in both cases you’ll need to remortgage.
If on the other hand you’d like to borrow more money, perhaps to fund an extension or essential maintenance work on your property, remortgaging is a good way to unlock some of the value in your home to give you the funds you need. There are always new and varying mortgage products available, some with more flexible features that may suit your lifestyle better now than when you took out your original mortgage, making remortgaging an attractive option.
We’ve found that our clients can save as much as £200 a month by switching their mortgage, so we believe that remortgaging is always worth the effort. Although rising, rates are still low, so even if you’re tied in to your current provider, it could still be cheaper to switch and pay any fees levied. An experienced mortgage broker like WMG can quickly calculate whether you can save money even taking into account any early-release fees in your current mortgage contract.
If you’d like to find out if you could save money by remortgaging, why not complete our simple mortgage questionnaire?
