It can be stressful enough getting a mortgage in the first place. Why would you want to put yourself through it all again a few years later?
The simple answer is to save money, and potentially thousands of pounds, every year.
Remortgaging means replacing your existing mortgage with a new deal—whether your current rate is ending or you simply want to change your terms, for example, taking out a new two‑year fixed deal once your existing one expires. The new mortgage is used to pay off your original lender, and if the new arrangement is more favourable, you could end up owing less overall and reducing your monthly payments
Why you could save money with a remortgage?
There are lots of reasons why you could save with a remortgage.
- You take advantage of introductory rates. The cheapest rates tend to be the introductory rates on fixed-rate or tracker mortgages. No need to switch to your lender’s usual rate when the low-rate period ends. Switch to another lender instead.
- You avoid your lender’s standard variable rate (SVR) – A lender’s SVR is the most expensive option and can fluctuate at the lender’s discretion.
- You could benefit from inflation. if your home’s value has increased; the extra equity will mean you could be borrowing a smaller proportion of the total property cost. For example, 60% loan tends to be cheaper than a 75% loan.
- You may need to borrow less. You have been paying off the amount you originally borrowed. You may not need to borrow as much to pay it off.
- You can shop around. If you have been paying off your existing mortgage without problems, you can potentially be more attractive to lenders. You may find that more lenders will have offers for you.
Is it a suitable time to remortgage?
If you are coming to the end of a long-fixed rate – 5 years or more – you will find that rates have increased considerably from their historic lows. But being transferred to your lenders current deal is likely to be much more expensive than remortgaging.
Some of the most competitive deals on the market are likely to be available to those who are remortgaging and seeking to borrow no more than 60% of their property’s value.
If you arrange a remortgage deal now you are not obliged to take it. If rates drop and a more suitable deal becomes available, you could remortgage to that instead.
Is there a downside?
Your new lender will need to check that you can afford the mortgage you’re applying for. This means going through the same affordability and other checks you had with your first mortgage.
This can be worrying, but if your circumstances have not changed your eligibility should not have changed either. If you’re moving from one repayment mortgage to another, the process should be relatively straightforward, as you’ll be borrowing less than you did at the start of your previous deal.
You need the same paperwork – wage slips, bank statements and ID, and the new lender will want to check the property is worth the money,
You’ll need to instruct a solicitor if you’re moving to a different lender. A solicitor or conveyancer will sort the paperwork required for the new contract, such as drawing up the mortgage deeds, and naturally there will be a charge for their services.
You may also have to agree to certain conditions that you’ll have to fulfil when the deal begins, such as paying off remaining credit card debt.
In most cases the savings from remortgaging will make the costs and hassle worthwhile.
So how do you do remortgage?
The remortgaging process can take a while, so if you want to avoid spending time on your lender’s SVR, it’s a good idea to get the process started as early as six months before your current deal is due to end.
Ask your lender for a redemption statement that shows how much is on your remaining mortgage loan, which you’ll need to borrow if you remortgage.
You can start contacting lenders yourself, but you could save a great deal of time and get a much a more competitive deal with an independent mortgage expert such as the Continuum team.
We can search the entire mortgage market to find the deals that are most suitable for you.
But we don’t stop there. We can work with you to work out what kind of mortgage deal you need, whether it would be more appropriate for you with a fixed-rate or tracker mortgage for example.
If your current fixed rate deal is coming to an end in the next 6 months, it’s time to call us at Continuum today.
This article is intended for general guidance only and is based on the opinion of Continuum it does not constitute financial advice. Individual circumstances vary, and you should consider seeking advice from a regulated financial adviser before making any decisions about your mortgage planning.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
