If you’re asking yourself “should I remortgage?” then it’s probably worth looking into. Remortgaging can be a way to save you money on what is likely to be your biggest ongoing monthly expense, especially if your current mortgage term is coming to an end. Read on for information on remortgaging, such as why you should remortgage and when you should consider remortgaging, to find out if now’s the right time.
In this article:
- Why should you remortgage
- When you should remortgage
- When is it best not to remortgage
- Can you remortgaging early
Why should I remortgage?
There are various benefits of remortgaging and reasons why you should consider doing it. Find out more information about these below:
- Your fixed rate mortgage is coming to an end – when your mortgage contract comes to an end, you will move from your fixed interest rate onto your mortgage providers standard variable rate (SVR) which is usually a much higher rate. Remortgaging allows you move onto another contracted rate, which is usually cheaper than the SVR.
- Changes in interest rates – if interest rates rise and you are on a variable mortgage, you may want to switch to a new deal for security, as with a fixed rate you know exactly what you will be paying each month. Conversely, if the interest rates are decreasing, you may also want to remortgage to take advantage of cheaper deals to bring down your monthly repayments.
- You’re looking to release equity and increase your borrowing amount – if you have equity saved up in your house, you can remortgage to gain access to this money.
- Your current mortgage deal has restrictions that no longer suit your situation – every mortgage has its own rules and conditions, which can be limiting if your own situation has, or is about to change. Conditions such as, the ability to make over payments, moving house with your mortgage, or being able to default payments all differ with providers and their deals and so if your situation has changed you may want to remortgage to change what you can do
- Buy another party out, or add a party to the title when transferring equity – if you are making changes to the title of deeds with the land registry, you will likely need to remortgage, as your mortgage lender will need to consent to the changes and update the mortgage with the new details.
Is it a good time to remortgage now?
Remortgaging can be beneficial, however deciding if now is a good time to remortgage is a very personal decision. There are many reasons why you would be considering remortgaging and a lot of external factors which impact if now is the right time. The base rate is one of the biggest external factors, as this directly impacts mortgage interest rates and your monthly repayments, find out more information about the current base rate and what it may mean for you.
When should I remortgage?
- If you’re on a fixed term mortgage contract, you should look at your remortgage options, six months prior to the end of your mortgage term. Remortgaging can take a couple of months and if you don’t arrange a new deal to start when your current term ends, you will end up on a standard variable rate, which will not be a favourable rate.
- If your home has substantially increased in value, you can remortgage to take advantage of a lower loan to value (LTV) rate. A lower LTV means you may be able to get better interest rates through remortgaging and therefore your monthly repayments may decrease.
- If you need to add or remove someone from the title deeds, which is known as transferring equity, you will need to remortgage.
When is it best not to remortgage?
Remortgaging may not be a suitable option for all homeowners, consider the following when deciding if you should remortgage:
- If the value of your home has dropped, remortgaging may not make sense, this is because you’ll have less equity in the house, so your LTV ratio will be higher. When you have a higher LTV ratio, you will get a less advantageous mortgage rate and therefore, remortgaging may cost you more money. To work out how much equity you currently own, all you need to do is subtract the amount remaining on your mortgage from the value of your property.
- If you don’t have much left to repay on your mortgage, the savings you can make by changing deals may be outweighed by the fees and costs involved in switching.
- If you have had credit problems since you last took out a mortgage you may find it harder to secure a mortgage, and it’s likely you will be charged a higher rate.
Can I remortgage early?
If you’re on a fixed term deal with a number of years left to run, you may be able to remortgage early, however you should first check your mortgage contract, as well as reviewing the exit fees, or early repayment charges involved. You can sometimes add the cost of terminating your contract early to any fees charged for a new deal and work out whether you’ll be saving money based on your new monthly payments.
Disclaimer: This article is for informal and general advice on remortgaging