Most homeowners will come to remortgage at some stage, usually to replace an existing mortgage with a better deal or borrow more against their equity.
Around 30% of all mortgage applications are remortgages, so they're an everyday product - but with lots of potential pitfalls to watch out for!
Today the Revolution Brokers team has compiled a short guide to remortgaging, so you know what to expect and when is the best time to apply.
For more information about remortgaging your current deal, or to compare the best rates on the UK market, please get in touch at [email protected] or give us a call on 0330 304 3040.
How Does Remortgaging Work?
Mortgages are a big financial commitment, and if you are on a standard variable rate or haven't reviewed your interest, you could save thousands by remortgaging.
Shopping around is crucial since there are countless lenders and products to choose between.
As a whole-of-market broker, we know only too well how easy it is to apply for a remortgage that looks like a great deal but turns out to be far more expensive than anticipated, so professional, independent advice is highly advisable!
However, there are pros and cons to applying for a remortgage, so it's equally important you know when to apply and when to stick with your existing product.
Great Reasons to Remortgage
The number one reason our clients remortgage is to save money. Let's run through some of the good reasons to get in touch and discuss a remortgage deal:
Remortgage Because - Your Deal is About to End
Most fixed-rate deals last about five years maximum, which is the upper limit on tracker or discount mortgages, too.
After that time, your lender will switch you onto their standard variable rate (SVR). No secret, that's the most expensive rate you're likely to pay, and you will very likely save a great deal by remortgaging.
The issue here is that many people leave it too late or wait until they get switched over before thinking about a remortgage.
Agreements take time to put together, which means you have to pay higher costs until a remortgage is in place.
Our advice is to start thinking about your remortgage a good three to six months before your rate ends, so you've got plenty of time to shop around and put a deal in place.
Remortgage Because - Your Current Rate Isn't Competitive
Interest rates can go up or down, and it's common to find that a reasonable deal a few years ago suddenly isn't quite so attractive.
However, you do need to make sure you're not in a fixed agreement, which means you'd likely pay anywhere from 2% to 5% of your outstanding balance to remortgage elsewhere before the term ends.
That doesn't mean a remortgage won't still save you money (it might well!) but that you need to be aware of all the associated costs before making any decisions.
Remortgage Because - Your Home Has Increased in Value
Another excellent reason to remortgage is if your property has risen sharply in value. You might not want to borrow any more, but you could still save a lot!
Here's why. Lenders base your interest rate on Loan to Value - that's the amount you're borrowing as a percentage of the value of the property.
If a home worth £200,000 a few years ago is now worth £300,000, and you've been making repayments in the meantime, your remortgage will be at a substantially lower LTV than the original mortgage.
Hence, you will achieve lower interest rates and be a more attractive lending proposition.
Remortgage Because - Interest Rates Are Rising
If you're considering remortgaging because you've seen media reports about interest rates going up, the first thing to do is to give us a call.
In many cases, an interest rise could be about 0.1%, which won't make much difference to your mortgage, depending on the type of product you have.
The best option when remortgaging due to interest rates is to seek independent advice from Revolution Brokers, who can advise whether you're best off with your current mortgage or can get a better rate elsewhere.
Remortgage Because - You Want to Pay Back More of Your Debt
Some lenders allow overpayments, and others don't - so if you're in a position to pay back more of your mortgage, perhaps because of an inheritance or pay rise - then a remortgage could be a great solution.
Remortgaging would allow you to cut down on the total debt, and therefore find a cheaper rate.
However, it's still worth seeking advice because if you have early repayment penalties on your current deal, it'll need careful analysis to ensure a remortgage is the right solution.
Remortgage Because - You Want to Switch Your Repayment Type
Changing from interest-only to a repayment mortgage shouldn't usually require a remortgage. Still, if your current lender isn't willing to switch your repayment type, then a remortgage might be an option.
You can also change a mortgage from interest-only to a partial capital repayment blend.
Conversely, changing from repayment to interest-only is often a little more complicated, and a remortgage might be the best solution.
Remortgage Because - You Want to Borrow More Against Your Home
Remortgaging to borrow more is a common reason. If you've been repaying your mortgage, and your home has increased in value, you build up equity year on year.
In some cases, your lender will happily remortgage at a higher value, following an updated valuation. Others might be reluctant to offer an extended loan or won't provide great terms.
If remortgaging is an option, it's vital to assess any application fees and ensure you're happy that the cost is worthwhile to release the equity you'd like to borrow against.
Expert Advice on Remortgaging
As we've seen, there are multiple reasons you might wish to remortgage.
In any scenario, the best course of action is to consult an independent broker to ensure you're getting the most competitive rates out there.
Give Revolution Broker a call on 0330 304 3040 or email us at [email protected]. We'll assess your current deal, advise on whether there are better rates out there, and steer you through the remortgage process from start to finish.
