Remortgaging means shifting your mortgage from one lender to another to potentially get yourself a better deal. And you don’t even have to move house to do it.
So, if you already have a mortgage and are looking to move lender, or maybe you
own the property outright but now want to borrow money against it. Here is why 2021 is the perfect time to remortgage your property.
Reasons to remortgage
- Your current deal is ending
Many of the most suitable mortgages only last for a short amount of time. Most likely between two to five years. This is the typical length of time offered on a fixed rate, tracker, or discount mortgage.
When your mortgage agreement comes to an end, your lender will put you on its bog-standard variable rate (SVR). However, this is likely to be higher than your old interest rate and not the lowest rate available to you. Therefore, you want to be ready to remortgage to a cheaper rate. We recommend looking around 14 weeks before your agreement ends.
- Looking for a better rate
If you are tied into an initial deal, then you might have to pay an early repayment charge. This can be big, often 2-5% of your outstanding loan. When you repay any mortgage, there can even be a small exit fee – sometimes known as an ‘admin fee’ or a ‘deeds release fee’.
This doesn’t mean you shouldn’t consider it as your savings could potentially be huge – especially if you have a large amount of mortgage debt. Just be sure to do your sums before taking the plunge.
- Your home’s value has gone up
If the value of your property has risen rapidly since you took out your mortgage, you may find you’re in a lower loan-to-value band. Therefore, you may now be eligible for much lower rates. Again, we recommend you do your sums before following through, but it’s worth having a look and doing the research.
- Interest rates are going up
Before you panic that interest rates are going up, you need to check what is meant by ‘rates going up’. If it’s the Bank of England base rate that is predicted to go up, then this may affect your mortgage payments directly, depending on the type of mortgage you have. These rates are currently only 0.1% which is a very low rate. If it’s the rates that new customers are being offered, then don’t assume that this automatically means yours will be affected.
- You want to overpay and your lender won’t let you
Perhaps you’ve had a pay rise or inherited some money. You’re now looking to pay extra on your mortgage, but your current deal won’t let you. Or maybe it will only let you make a small overpayment.
A remortgage will allow you to reduce the loan size and potentially get a cheaper rate as a result. However, be careful of any early repayment charges or exit fees. Always compare this to how much you’d save with the new, lower mortgage deal.
- Switching from interest-only to a repayment mortgage
You shouldn’t need to remortgage to do this, your lender should be happy to make this change for you. You can even change part of the loan to capital repayment and leave some on your interest-only deal. This can be particularly useful for anyone with an underperforming endowment mortgage which is expected to result in a shortfall at the end of the term.
However, it’s a totally different story if you want to change from capital repayment to interest only. Be prepared for your lender to be difficult if you try to do this.
- Borrowing more
Has your current lender said no to lending you extra money? Or the terms they’re offering aren’t very good or what you were expecting. Remortgaging to a new lender might enable you to raise money cheaply on lower rates. However, always remember to take all the fees into account to see if it really is cheaper than other forms of borrowing.
The new lender will always ask you what the extra money is for. The most commonly acceptable reasons to raise money are for home improvements and paying off other debts. Be prepared for your lender to ask for evidence if you are borrowing a large amount, for example, a builder’s quote, or proof that you have paid off the debts.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
