Should I remortgage my home?

Remortgaging at just the right time can unlock some fantastic perks for UK property owners. Being financially savvy with your mortgage product can after all save you thousands of pounds every year, but is now the right time for you to remortgage?

Here we take a closer look at when you should and shouldn’t remortgage your home so you can get a clear idea about the pros and cons of the entire process.

Your mortgage deal is coming to an end

If your current mortgage deal is coming to an end, now could be the perfect time to explore your remortgaging options.

By failing to remortgage and secure another deal, your lender is likely to place you on their standard variable rate (SVR). Which? explains more about the problem with SVR mortgage products:

“Standard variable rates are usually higher than the rates offered by other types of mortgage. In January 2019, the average SVR was 4.9%, compared to 2.52% for a two-year fixed-rate mortgage. This can mean paying thousands more than you need to. Your lender can choose to change its SVR at any time. This can mean your monthly repayments could suddenly increase without warning.”

SVRs are influenced by the Bank of England’s base rate, which fluctuates over time. With the recent news that interest rates may rise next year, this could leave many SVR mortgage holders in hot water.

By using this opportunity to switch to another fixed deal, you can secure better interest rates and avoid the uncertainty of an SVR product.

You don’t have much left to pay

If your outstanding mortgage balance is below £50,000, remortgaging may not provide the savings you’ve been looking for. As a rule of thumb, smaller mortgage debts incur greater fees, which makes it more sensible to stick with the product you’ve got, even if interest rates are higher.

Your home has increased in value

Capitalising on your current home’s value is easy when remortgaging. Remortgaging when your property’s value has increased gives you the freedom to secure a lower loan-to-value band and enjoy even lower rates.

Thanks to rising house prices, you may be able to borrow more by remortgaging, which could free up cash for further home improvements, a well-timed holiday, or a brand new set of wheels.

Your home has decreased in value

The impact of the Covid-19 pandemic has left many lives and many industries with a lot of uncertainty. Whether your home value has decreased leaving you with very little equity or your circumstances have changed, moving to a new lender via remortgaging may not be the best option.

Tougher lending rules, introduced in 2014, mean your current circumstances – and any credit issues you may have experienced since you took out your last mortgage – could make you ineligible for a better mortgage deal.

You’ve saved some cash and want to overpay

Using savings wisely is one thing we all want to do, and there’s no better way to secure a more financially sound future than paying a little extra off your mortgage.

Most lenders enforce a cap on how much extra you can pay off your mortgage. If this cap is too restricting and you want to pay more, remortgaging to a product that allows you to do just that is a great idea.

By remortgaging and overpaying, you can lower the size of your loan and enjoy cheaper monthly repayments.

Your product has a hefty early repayment charge

If you want to end your mortgage deal earlier than planned, most lenders instate an early repayment charge.

Some charges are larger than others, which can take remortgaging out of the equation for many. You don’t have to switch lenders, however. By working with your current lender and transferring to a more suitable product, your early repayment charge could be decreased.

You’re ready to transition from interest-only to repayment

If your current lender is not willing to switch you from an interest-only mortgage to a repayment mortgage, remortgaging will allow you to do this.

Remortgaging may not be necessary, however; some lenders will happily make the switch from an interest-only to a repayment product. The same can’t be said if you’re looking to switch from a repayment to an interest-only mortgage.

Discover whether remortgaging is the right option for you by contacting our advisors today.

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