Remortgage – do not pay more than you should
Remortgaging in the current climate
Listen below as Jodi talks all about Remortgaging in the current climate.
Is it the right time to remortgage?
It is tough to know when to remortgage, or why to remortgage and how to remortgage.
There are plenty of reasons why people remortgage and you can ask a mortgage adviser whether it i the right financial move for you. You are not alone.
In this difficult climate, there is no better place than The Mortgage Broker, to understand whether it is the right time for you to consider your options, and understanding the market landscape, along with the products available, is crucial in giving you the best chance to get the best remortgage deal.
Here some reasons why you may consider a remortgage:
- Home Improvements
- Debt Consolidation
- Release Equity (Cash!)
- Flexible Options
- Better Interest Rate
What is remortgaging and what are my options?
A remortgage is where you already own your home and you’re looking to change the parameters of your current mortgage. It might be that your current rate is ending or you want to borrow more. It is all about about getting a new mortgage on your existing property.
When is it a good time to remortgage?
You should look to remortgage at 6 months before your fixed rate comes to an end. With interest rates being as unpredictable as they are, it is important to search the market and ensure you are giving yourself the best opportunity to remortgage onto a better rate.
Most people are tied into a rate, whether it’s a fixed rate or a tracker rate, and you would have an end date for that particular product. For example, your rate might be ending in 5 months time and with current interest rates, it may mean that your monthly payments will be going up at that time. However, if you get ahead of it, you can line up a better rate or a more suitable mortgage for your circumstances.
At The Mortgage Broker, we advise our customers to start looking at options six or seven months before their rate is expiring. That gives you plenty of time to make decisions, run all the numbers and fully understand what’s going to happen. Then you can apply for a new mortgage and secure a new rate up to six months ahead of your current rate expiring.
When is remortgaging not a good idea?
If you’re tied into a fixed period you would normally have quite a hefty penalty to come away from your current lender early. So it may not be a good idea at that point – unless you have a really clear reason for needing to remortgage.
You may want to remortgage to get a better rate – although I’m not sure that’s a realistic example in the current market. It’s more likely you will be going from a low rate to a higher one.
You might want to borrow more, to do crucial improvement work to your property, to extend your home or clear debts. In these cases you may find it’s worth paying the penalty to be able to remortgage early.
In the past I have had people on higher rates that have paid the penalty because the lower rate makes the overall cost worth it. But an advisor will always sit and go through the pros and cons with you and fully weigh up whether it’s cost effective for you to remortgage or not.
Why remortgage at the end of a fixed rate deal? What happens if I don’t remortgage after my deal expires?
If you opted to do nothing at all, you would just roll on to your lender’s standard variable rate. When your fixed period ends, the mortgage doesn’t doesn’t magically stop – you start paying the variable rate.
Unfortunately at the moment variable rates are pretty high – with most high street lenders, the variable rates are between 6% and 8.5%. Most people don’t want to roll on to that much higher rate unless it’s essential.
But if you’re planning to move in the very short term or change your setup in the short term, paying the variable rate for a month or two might be better than tying yourself into a new deal. Obviously, on a new deal you’re then going to have another penalty.
Most people, though, when their fixed deal is ending, want a new fixed deal either with a new lender or with their existing lender. It’s definitely going to be better than paying the variable rate.
Our job as a mortgage broker is to source the market for the best options for you. Our experience and depth of knowledge can help you to secure that all-important mortage at the best rate we can.
How do I improve my chances of getting a good remortgage?
On every remortgage, lenders will look at your credit history, so please don’t miss any payments. Even paying a credit card a day or two late can have quite a negative impact on your overall credit profile. Generally, focus on good bank account conduct and not going over overdraft limits etc.
If your property has dropped in value, you might find that you’re at a higher loan to value where the rates are a little bit harsher. Ideally, then, you want the property valued as high as possible to get a better rate.
What fees are associated with a remortgage?
The good news is it should be pretty minimal. The majority of lenders offer remortgages with no upfront valuation fees or application fees. Some lenders will offer free legals so you don’t have to pay for the legal costs involved with swapping from one lender to another.
All lenders will either offer a low rate with a product fee, or a higher rate with no fee. Your advisor will go through the different options with you, but 99.9% of the time if there is a lender fee, you can normally add it to the mortgage. Finally, you’ll have your broker fee.
How can a mortgage broker help if I need to remortgage?
With the way the market is changing, a broker can get a rate secured for you far quicker than you’d be able to do directly with brokers. Honestly, we are looking at rates a hundred times a day.
We get notifications from lenders if rates are going to change. You apply for a remortgage, we secure a rate and if rates come down we can swap you on to the lower rate.
But if rates go up, it doesn’t impact you because you secured the rate at the time of applying. So there’s a real benefit to working with somebody who’s got their nose in the numbers all day long – because you can be sure that you’re getting the absolute best rate possible.
As with everything, remortgaging may sound straightforward, but it isn’t not always. Having a broker go through the quirks with you can mean you get a far better deal than you would potentially get by doing your own research. Applying to a bank directly could mean waiting two to three weeks for an appointment with them. And in that time rates could change three or four times over.
Think carefully before securing other debts against your home.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up with your mortgage repayments.