Remortgaging at the right time is one of the most financially savvy decisions a homeowner can make. Citizens Advice stated that the two-fifths of mortgage holders who fail to remortgage at the end of their fixed-rate period end up paying thousands of pounds more in interest every year. This is because, at the end of your fixed-rate period you’ll be moved onto the higher Standard Variable Rate and your monthly repayments will likely increase – so it’s important to shop around for a better deal before this happens.
The most popular reason for remortgaging is to pay less interest, but you can use your remortgage in other ways too. In this guide, we’ll explain the different reasons people remortgage so you can decide if it’s right for you. You may want to remortgage for more than one of these reasons, for example to release some equity at the same time as getting a new fixed-rate deal.
Get a New Fixed-Rate Deal
If you don’t remortgage at the end of your fixed-rate period you’ll be moved onto your lender’s default rate and your monthly repayments will likely increase significantly. Although you can remortgage with your current lender, you should take this opportunity to speak to a whole of market mortgage broker and find out what deals are available to you. Just like shopping around for the best car insurance or broadband deal, you’ll likely find a much better rate by switching to a new provider.
Release Equity as Tax-Free Cash
Many people remortgage to borrow more money, which you can release as tax-free cash and use for many purposes. Your lender will likely want to know why you need the money before accepting your application, but two of the most common reasons are to fund home improvements such as a new extension or to consolidate debts to reduce your monthly repayments. Borrowing money by remortgaging can be cheaper than other forms of borrowing in the short term, but you may end up paying more interest overall as you’ll pay it off over a longer period of time. It’s still one of the most popular ways of borrowing money, but we recommend you discuss your options with one of our advisors so you fully understand the implications.
Take Advantage of Increased Property Value
If your property has increased in value since taking out your mortgage you may now be eligible for a better deal. One of the criteria lenders use to work out their offers is called Loan to Value (LTV), which is the percentage of the property value that will be covered by the loan. If your house was worth £200,000 and you borrowed £180,000, then your LTV would have been 90%. However, if your property is now worth £250,000, your LTV would now be 72%, meaning you should have better mortgage products available to you.
Take Advantage of Low Interest Rates
Interest rates have fallen dramatically since the end of 2008, and at the time of writing, the base rate is the lowest in history at just 0.1%. Accordingly, many lenders are now offering the lowest ever mortgage interest rates, and you may be able to save a considerable amount of money by remortgaging to take advantage of this. If you’re still tied into a fixed-rate period then it’s important you weigh up any savings against the cost of ending the deal early. Our friendly advisors can look at your current contract and what deals are available to you elsewhere to work out if you could save money by switching to a new lender.
Reduce the Term of Your Mortgage
If your circumstances or goals have changed, you may wish to remortgage to a new deal with a shorter term. This would allow you to be mortgage-free sooner and potentially pay less interest over the term of your mortgage.
Get a More Flexible Mortgage
If you are happy with the term of your mortgage but you would like the option of paying off your mortgage sooner, you may want to remortgage to a more flexible deal that allows you to overpay when you’re able to without being charged.
Move From an Interest-Only to a Repayment Mortgage
If you currently hold an interest-only mortgage you may want to remortgage onto a repayment mortgage. As with all remortgages, this is a great time to speak to a whole of market broker for free and find out what deals are available to you from other lenders.
The Bottom Line
The most common reason to remortgage is to get a new fixed-rate deal in place before your current one comes to an end, which is usually 2-5 years after taking out the original mortgage. If you don’t remortgage at this point, you’ll be moved onto the Standard Variable Rate and you could pay thousands more in interest every year. Remortgaging can also be used in other ways, and you may want to take advantage of more than one of the possibilities detailed in this guide. Although you can stay with your current lender, you should be able to save money by shopping around for a better deal, so take this opportunity to see what options are available to you by speaking to a whole a market mortgage broker. If you want to find out more about how remortgaging works click here.
We’ve been helping our local community with remortgages for over 30 years! As whole of market mortgage brokers, we have access to thousands of great products and we understand the criteria of each lender – meaning we should be able to find a great deal that suits your needs perfectly. We’ll also guide you through the process and liaise with your lenders to make the switch easy for you.
Book your FREE consultation with one of our friendly advisors to get going quickly – this can be done remotely via phone or video call if you’d prefer. We look forward to helping you!
