Remortgaging might feel like a big step once you’re settled, but reviewing your current mortgage could lead to significant long-term savings. Typically, it is good is to start exploring your options around six months before your current deal ends, giving you plenty of time to secure the best possible rate for your next mortgage.
What is remortgaging?
Remortgaging is the process of switching from your current mortgage deal to a new one, either with your existing lender or a different one. It’s essentially shopping around for a better deal but for a property you already own.
Why remortgage?
- Better interest rates and terms
If you are coming to the end of your fixed rate deal and you do not take action to renew or change, you’ll automatically get switched to standard variable rate mortgage (which is usually significantly higher than what you’re currently paying), in which mortgage terms are set by the lender and can change at their discretion. By remortgaging, you can secure a new deal that offers a lower interest rate and more predictable payments, potentially saving you a significant amount of money long term.
- Your circumstances and life plans have changed
When you bought your first home, your circumstances were probably very different from where you are now. You may have had children, seen them move out, or even changed jobs. Remortgaging can give you the flexibility to overpay on your monthly payments and the opportunity to invest in your property through redecoration, renovations, or other updates.
- To change your mortgage type
Remortgaging gives you the flexibility to switch to a different mortgage deal. If your current type is coming to an end, it’s the perfect time to explore new options. If you want to change to a fixed rate deal, variable rate or even interest only, remortgaging gives you this flexibility.
- To access cash from the equity you’ve built up
As your life evolves, whether through career changes, growing your family, or children moving out, your mortgage needs may shift too. Remortgaging could allow you to release any equity that you have built up over the years. Releasing equity means you can borrow over your existing mortgage and take the difference as a tax-free lump sum.
- Funding major expenses
Does your home require house renovations such as a new kitchen or extension?
Remortgaging could allow you could unlock the extra cash needed, typically at a lower interest rate than other forms of borrowing.
- Unlock overpayment flexibility
Sometimes the bank will not allow you the flexibility to overpay your mortgage if your circumstances have changed and you are now able to.
Remortgaging allows you to switch to a more flexible lender, giving you the freedom to make overpayments when your financial situation improves.
What are the drawbacks of remortgaging?
- Risk of higher interest rates
Remortgaging is switching from your current mortgage deal to another and while this can sometimes offer better terms, there’s always the possibility that the new interest rate could be higher than your current one. This could happen if market rates have risen since you took out your original mortgage, or if your financial circumstances have changed and you no longer qualify for the most competitive deals.
- Negative equity risk
If your property’s value has dropped, you could end up in negative equity, owing more than your home is worth. This can make remortgaging or selling difficult. Plus, the cost of a required home valuation can add to the financial strain.
- Hidden costs
Remortgaging can come with hidden costs and fees that could mean it is not worth it in the long run. However, most mortgage lenders try and take the costs out of remortgaging and will typically pay for any new property valuations as well as the legal fees associated with switching lenders. It’s important to establish from the outset if there will be any remortgage fees that you will need to pay.
- Lender caution based on circumstances
Has your employment / financial position changed? If you’re self-employed or your financial situation has changed, lenders may be more cautious. Some may ask for detailed income evidence, making the process more complex and time-consuming.
Considering remortgaging?
If your fixed rate is coming to an end or you want to release some equity from your property, speak to our expert mortgage director, Mark Chadwick who is available to help. He will be able to discuss your current deal and your goals in order to align them to the options available to you.
Ready to explore your options? Contact Mark using the button below.
PM&M Mortgages Ltd is an Appointed Representative of The Right Mortgage Ltd, which is authorised and regulated by the Financial Conduct Authority.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
