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Remortgaging can save you money – you could get cheaper interest rates and reduce your monthly payments. But when is the most appropriate time to start looking for a new mortgage deal?
What is remortgaging?
When you remortgage, you seek out and apply for a new mortgage deal. It might be with your current mortgage provider, this is technically called a ‘Product Transfer ‘ or you could choose to switch to a new lender. There are many reasons why people start looking for a new mortgage.
When should I look to remortgage?
The main reasons to remortgage include:
- Your current deal is coming to an end – particularly if it’s a fixed rate mortgage.
- You are concerned that interest rates might go up and you want to lock in your current payments by taking out a fixed rate mortgage at today’s rate.
- Interest rates have dropped, so remortgaging should reduce your payments.
- You want to switch from interest-only to a repayment mortgage – or vice versa.
- The value of your home has increased. If the increase is considerable, you’ll have a better loan-to-value ratio. This can give you access to lower rates.
- To borrow more – to pay off some debts or fund home improvements.
- To pay off a lump sum of your mortgage or start overpaying – not all mortgage deals allow this.
- You want a more flexible mortgage.
Is a remortgage sometimes not a good idea?
Remortgaging isn’t always the most sensible choice, especially if:
There’s a high early repayment charge
With many mortgages, ending the deal early is likely to incur you an Early Repayment Charge. This can be up to 5% of the mortgage balance – so it could run into several thousand pounds. It can be worth waiting until the end of your benefit period – you can however shop around with us, to ensure you have planned your next move in time.
Your financial situation has changed
If your earnings have reduced since you took out the mortgage deal you might not be approved for the level of borrowing you need.
The outstanding debt is small
Changing deals will have little effect on your payments if there’s not much left until you pay off your mortgage. But if you want to borrow more, you can use your equity to increase the loan.
You don’t have much equity
If your property value has dropped or you haven’t reduced the debt very much, you will have a high loan-to-value. A high ratio makes it less likely you’ll get competitive rates.
You’re already on a good rate
If you have a particularly low interest rate on your current mortgage, whether it’s a variable or fixed rate deal, it may not pay to remortgage.
What happens if I don’t remortgage after my deal expires?
You should always plan to switch mortgages towards the end of a fixed rate mortgage term. This type of mortgage usually lasts two to five years, after which you move to the lender’s standard variable rate. This rate is usually expensive and will put your payments up considerably.
Staying with your existing lender and applying for a product transfer will keep costs down and will not involve an affordability assessment (lender product fees may however apply). Switching lenders will mean that your new provider will fully underwrite your mortgage and you will also need to consider legal fees and valuation costs (these are sometimes covered by the lender).
Are there fees for remortgaging?
Remortgaging involves the same types of fees and costs as when you’re buying a home. Mortgage lenders will often request an Arrangement Fee. This fee may be a fixed sum or a percentage of the total loan, and you can pay it upfront or add it to your mortgage total.
Some lenders include free legal costs and valuaitons, while others charge for this. We will make sure we look at both the fees involved and the new monthly repayments when advising the best option.
What can I do to improve my chances of a good remortgage?
If you’ve paid off a good chunk of the mortgage since you signed up with your lender and your income and credit score haven’t changed, getting a good remortgage should be straightforward.
You’ll need some documents ready, including valid ID, such as a passport and driving licence. Pull together recent bank statements, payslips, utility bills and your P60.
How can a Mortgage Broker help with a remortgage?
To find the best options for a remortgage you need to do a fair bit of research and comparison. The advantage of a broker like Mortgage Marketplace is that we do all that work on your behalf. We will search across high street lenders and specialists to find a competitive deal that meets your needs. We’re registered in England and fully authorised by the FCA, so contact our registered office today for an initial chat, free of charge.
Frequently Asked Questions
Call us today on 0800 170 7021 to discuss your borrowing potential and eligiability.
Typically, the mortgage process will take 2-6 weeks to reach approval.
A mortgage offer is usually valid for 6 months.
Please be aware, the process is currently taking longer due to Covid-19. Please see question ‘How has Covid-19 affected the mortgage market?’.
Whilst you are not required to take out a life cover, our job is to ensure your mortgage is affordable, no matter what. It may not be nice to talk about, but if something were to happen to you, you want to know your family and investment are safe.
We will advise on all the options available and provide a no obligation quote from our partner providers.