For most people, your mortgage is your biggest financial commitment and usually your biggest monthly outgoing. For the money savvy, the idea of remortgaging is a no-brainer and something that is researched regularly to ensure they are getting the best deal and making savings where possible. For others, the idea of remortgaging is an unknown concept.
This guide is here to explain what remortgaging is and the common reasons people remortgage, to hopefully ensure that you find the best deal for your circumstances.
What is Remortgaging?
Around a third of UK home loans are remortgages, so we understand that many of you already know what it is. For those that don’t, remortgaging is the process of taking out a new mortgage on a property you already own. Reasons for remortgaging vary depending on the homeowners’ circumstances but can include finding a better deal to save money each month, taking advantage of new rates and more cost-effective products, or freeing up cash.
Why Do People Remortgage?
If you’re unfamiliar with the concept it’s understandable to wonder why people remortgage their homes, but remortgaging can be a fantastic financial endeavour, and here’s why.
- To Find a Better Rate - wanting to find a better rate for your mortgage can save you money each month but you must understand the terms of your current deal, as there may be early repayment charges in place.
- To Avoid a Rising Interest Rate - depending on what type of mortgage deal you’re on, it could mean that a rising Bank of England interest rate could affect how much you pay each month. Understanding when the rate of interest is increasing is important as this will be factored into any fixed-rate deals you enter into when remortgaging.
- Reduce Monthly Bills - we all want to reduce our monthly outgoings but due to stress, mortgages tend to be forgotten when the time comes to renew, so many end up staying with their current lender. By shopping around or using a mortgage calculator or a mortgage broker, you can find better deals and significantly reduce your monthly payments.
- To Borrow More - for the big occasions in life such as a wedding, a family holiday, an emergency, home improvements, or an investment, remortgaging can help raise cash when needed. Finding a new lender that has a lower rate than your current, can help you to release cash in your home or help you by offering newer, lower rates than before.
- Your Home as Risen in Value - with the constant fluctuation in house prices, you may find that your house is worth more now than when you first took out your mortgage, meaning that you now have a lower loan-to-value (LTV) ratio. Remortgaging can mean you're eligible for lower rates which can free up some cash to spend wherever you need.
- Your Current Deal is Coming to an End - the majority of mortgage deals last between 2 and 5 years, once your time has ended your lender may automatically switch you onto their standard variable rate (SVR) which usually has a higher interest rate and can be far more expensive than remortgaging.
- For More Flexibility – if you have had a pay increase, you may want to pay more off your mortgage, but it could be prohibited due to mortgage overpayment terms. If this is the case, then switching to a lender that offers the flexibility you need or offers alternative packages could be more suitable for you.
When is it Possible to Remortgage?
We recommend starting to look for a new deal 3 to 6 months before your current deal ends, which will give you enough time to complete the application process. It’s important to keep an eye on the Bank of England’s base rate because if it’s dropped it may not be the best time to remortgage, however, if it has risen, then it could be a good time to take the plunge.
It’s important to consider early repayment charges (ERCs), these are terms tied into your contract that restrict you from leaving earlier than you’re entitled and may incur a charge. This may make it more expensive for you to switch your deal or you could make enough of a saving on a new deal that the ERCs balance out.
Conveyancing and surveying fees need to be considered in the savings you make from remortgaging too as they can be expensive, so it could be that staying with your current lender is cheaper.
How an Independent Mortgage Advisor in Manchester Can Help You Remortgage.
Using a specialist mortgage broker in Manchester like TaylorMade, you can significantly increase your chances of making savings by finding a better deal. TaylorMade has a team of experts who understand the mortgage market and have access to the best deals from hundreds of providers.
If you would like help with your next remortgage, then contact us today. We are your number-one mortgage advisor in Manchester, also operating throughout the UK.
