Remortgage

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All you need to know about Remortgaging

Remortgaging is just the term for changing your mortgage. Whether you decide to go with a new lender or to choose a different mortgage with the same lender (known as a product transfer), you will be applying for a new mortgage product.

In order to benefit from remortgaging, getting the timing right is critical. There are a range of circumstances whereby remortgaging is a good idea and equally as many circumstances where it’s not and can actually be detrimental.

When is a good time to Remortgage?

If any of the below circumstances apply, the likelihood is you will benefit from remortgaging:

Your current fixed rate is ending

If you took out a fixed rate deal for the attractive low introductory interest rate, the likelihood is, your fixed term will end in between two and ten years. When your product term ends, your mortgage repayments will default to the lender’s standard variable rate of interest (SVR).

Standard variable rates are often higher than fixed interest rates, are changeable and set by your mortgage provider. Remaining on a standard variable is almost never your best option.

You’re concerned about a rise in interest rates

Should you have a variable rate or tracker mortgage, a change to the bank of England base rate of interest may impact your monthly repayments. Whilst currently very low, the UK base rate could, of course, change at any time, so it’s worth staying aware. Remortgaging to a fixed mortgage, could help you gain security in your monthly payments to protect against future interest rate increases for a period of time.

Your home has significantly risen in value

If your home is worth much more now than when you took out the mortgage, your loan to value ratio will have fallen. A lower loan to value amount gives you access to better mortgage rates from most lenders which will save you money, as well as presenting the opportunity to increase your borrowing if needed. The increased equity could potentially also allow you to raise additional money out of your property to fund home improvements of other personal financial needs.

Your mortgage terms do not allow for overpayments

If affordable, making overpayments on your mortgage can be very beneficial. It can help you to reduce either the term of your mortgage or the monthly payments over the existing term. Most lenders will allow limited amounts of overpayments without penalties, but if you are looking to make large overpayments then it may be beneficial to remortgage to a product with unlimited overpayments. It’s important to consider, however, whether early exit fees on your current mortgage would outweigh the benefits as you pay off your mortgage.

You want to increase your loan

Remortgaging can sometimes be used to facilitate the purchase of high value items, such as cars. You could also use it for home improvements or to consolidate debts, although it’s often not the cheapest option and a personal loan alongside other financing options such as Further Advances should be fully considered.

You want a more flexible mortgage

If you’re looking for a mortgage with flexible options, such as payment holidays, or the ability to offset your savings against the interest, you may benefit from remortgaging.

You want to change your mortgage type

Although on rare occasions you may need to remortgage, most lenders can change your existing mortgage from an interest-only to a repayment mortgage without the need to remortgage. However if looking to change property use from residential to Buy To Let or visa versa a remortgage may be required.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

When is remortgaging not a good idea?

Even where you have a good reason to apply, if any of the below circumstances apply to you, it’s unlikely that remortgaging will be the right choice.

There are high early repayment charge on your existing mortgage

Even though many remortgage offers would result in savings, where the exit fees on your current mortgage are very large, they can outweigh these benefits.

Your remaining debt is very small

If you have less than £50,000 left to pay on your existing mortgage, the fees involved with remortgaging will often outweigh your savings.

Your financial circumstances have worsened

If your financial circumstances are worse now than when you took out your original mortgage, whether as a result of loss or reduction in income or recent adverse credit, it’s likely your application for a remortgage options may be impaired.

You have low or negative equity in your property

If your home is valued at a lower price now than when you took out the mortgage, your loan to value amount will be higher. This will usually result in very little or even negative equity available in your home (you owe more than your home is currently worth). Again, lenders will not accept a remortgage application in these circumstances. Lower equity in the property could also lead to being offered higher interest rates for a prospective lender.

You already have a great mortgage rate

Whilst you should always look out for better deals, if you already have one of the best mortgage rates on the market, it’s unlikely you will benefit from remortgaging. Where the savings are minimal, fees are likely to outweigh them.

What happens if I don’t remortgage after my deal expires?

You are under no obligation to remortgage and all that happens where you choose not to remortgage is that you will transfer to your lender’s standard variable rate.

Standard variable rates are almost always higher than other mortgage deals, so your repayments will often increase with this change.

What fees are associated with a remortgage?

You can expect to pay similar fees to the ones for your original mortgage when you apply to remortgage. Arrangement fees, booking, and legal fees are standard and in some cases, you will have additional valuation fees.

You won’t need a deposit in order to apply for a remortgage, but it can improve your chances of acceptance if you offer one.

It is now more common for lenders to offer a range of fee-free remortgage products where they will cover any property valuation and legal conveyancing costs associated with the remortgage application.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

How can a Mortgage Broker like Yellow Brick Mortgages help?

Picking the right time to remortgage your home is absolutely crucial in reaping the maximum benefits from it. We can advise you whether or not your individual circumstances are conducive to remortgaging. This can help you to avoid costly decisions and the potential for failed applications.

We can help advise you on your remortgage to find the most suitable possible deal for your circumstances and approach the lender most likely to accept your application.

We can help advise you on the best time to remortgage and when best to start the process to allow enough time for the process to complete without transferring temporarily onto a higher variable rate with your lender. We can also compare your other finance options and whether a new lender is more advantageous than selecting a new product with your existing lender. In either scenario we can help with the application process to through to completion.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

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