A remortgage is where you take out a new mortgage, often with a different lender, on a property that you already own. Typically this will replace your existing mortgage or will allow you to borrow money against your property.
Remortgaging can save you a lot of money so it’s always advisable to stay on top of where you are with your current mortgage to make the most of the options available to you.
So, when should you remortgage:
Your current deal is coming to an end
Typically, the best mortgage deals only last a short time – usually two to five years and these are offered as fixed rate, tracker or discount mortgages.
When your current deal comes to an end, your existing lender will put you on to a variable rate which will typically be quite a bit higher than your existing rate.
Start looking around 14 weeks before your rate ends.
You want a better rate
If you’re tied to a bad rate, while there are usually charges for exiting early, it can be worth looking at better deals as the savings over a long period of time may out weight the initial costs.
The value of your home has gone up significantly
If your property has risen in value significantly since you took out your existing mortgage, you may find you’re now in a lower loan-to-value band and therefore eligible for lower mortgage rates.
You want to pay off some of your mortgage early but your current lender won’t let you
If you’ve had a pay rise or inherited some money you may decide to use the extra cash to pay off some of your mortgage. Some lenders will let you but many will charge a fee for doing so, others won’t let you at all. There will often be early repayment charges or exit fees so it typically comes down to doing the maths and working out whether the long-term savings are worth the initial costs.
You want to borrow more
Typically, the success of asking to borrow more depends on what it’s for. You may be able to remortgage with a new lender if your current lender has said no but the new lender will still be wary about what you need the money for. Don’t be surprised if lenders ask to see evidence of what the money is for, builder quotes for an extension, etc. so make sure you’re not financing a new business venture.
No matter your reason remortgaging it’s always an option worth considering.
Once you have a mortgage, you can’t sit back and forget about it. It is important to review for a new mortgage once your fixed or tracker rate comes to an end in order to avoid moving onto the lender’s standard variable rate and possibly paying more than you need to. With so many remortgage products on offer, a mortgage broker such as Custodia Estate Planning can make the process easier by searching the market and comparing products to find the right one for you.
If you’d like to know more or speak to us about the best option for you, please get in touch: Speak with us.