Around one in three of all mortgage loans taken out are for the purpose of remortgaging – A remortgage being the acquisition of a second mortgage loan, often used to replace an existing mortgage or borrow money against the value of a property.
The most common reason for someone to consider remortgaging is that they could be saving money by switching to another mortgage provider. However, many people are still reluctant to shop around for a new mortgage, despite it often being their biggest financial commitment. That being said, there are certain circumstances which regularly prompt people into action:
Reasons to Remortgage
You’ve Reached the End of Your Current Deal
If you took out a fixed-rate mortgage when you purchased your property, the end of your initial term is the perfect time to consider remortgaging. The initial term will end after 2, 3, or 5 years, depending on the deal you agreed with your lender. Once it has ended, you will be switched to your lender’s standard variable rate (SVR) which could see you paying a higher rate than you were before. If this is the case, it’s worth shopping around to find a cheaper deal.
You Want a Better Rate
You might be considering a remortgage because you’ve seen better rates advertised. It’s important to bear in mind that some mortgages have early repayment charges (sometimes called exit or admin fees), which may well offset any savings you’ll make by switching. Remember to take any additional charges/fees into account when calculating savings, and to contact your lender if you’re unsure as to whether you’ll be charged.
You Want to Switch from Interest-Only to Repayment Terms
This should be possible without the need to remortgage. In most cases, your lender should be happy to arrange this for you if you contact them. Problems would only arise if you wanted to switch to an interest-only payment plan after agreeing terms for a repayment mortgage; in that scenario, your lender would likely be less accommodating. Either way, remortgaging is an option if your lender is unable to offer you the deal you’re looking for.
You Want Make Overpayments
Sometimes, circumstances change and we find ourselves in a better position then we might have expected. If you’ve received a promotion or found a better-paying job, it makes sense that you might want to pay off your loan a little faster. However, not all lenders allow this. If this has happened to you, you may well be considering a move to a more flexible mortgage. Take into account any early repayment charges or exit fees on your current deal, and if it still seems viable, a remortgage could be the solution.
You’re Worried Interest Rates Will Increase
The Bank of England increased the base rate in November 2017, meaning those with tracker mortgages and those on SVR deals saw their rate rise by at least 0.25%. With talk of further increases to the base rate in the future, anyone wanting to avoid them might see this as a good time to find a fixed-rate deal. Remortgaging purely to avoid a speculated rate increase is somewhat of a gamble, it is recommended to speak with an independent financial advisor.
You Want to Borrow More
If you want to borrow more money but your current lender has denied your application (or offered terms you find unacceptable), remortgaging could be a good way to borrow more at a better rate. However, don’t forget to take into account those early repayment charges/exit fees. The new lender will want to know why you’re looking to borrow more, with home improvements and debt consolidation being the most common acceptable reasons. Be prepared to be asked for proof in the form of workman’s receipts or loan statements if you’re asking for a large sum.
If any of the above applies to you, or you’re unsure of whether you’d save money by remortgaging, contact us via the button below and we’ll talk you through it! We have access to the whole of the mortgage market and are positive that we can find you the best possible deal!
