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Remortgages – how and when to look for a new deal
A mortgage is not something you secure once and forget about. There are many reasons why you might remortgage your home – to save money, unlock funds or get a different mortgage type.
What is remortgaging?
Remortgaging is the process of researching new mortgage deals and switching to a new provider. You might decide to remortgage because your rate is changing or because your financial situation has changed.
Here are some examples where getting a new mortgage could be a good idea:
- Your current deal is about to end.
- You want a better rate
- House prices have gone up a lot
- You’re worried about interest rates rising
- You want to overpay, but your current lender won’t let you
- You want to switch from interest-only to repayment mortgage – or vice versa
- You want to borrow more money, for home improvements or debt consolidation for example
- You want a more flexible mortgage
Remortgaging to get a better deal
It’s a good idea to look for a new mortgage when interest rates have dropped, as lenders will reduce their rates too. This will make your monthly payments cheaper.
Another important time to change is when you’re coming to the end of a fixed rate mortgage term. These usually last two, three or five years, after which you move to a standard variable rate (SVR) – which are often expensive.
When switching mortgages you can see if your current lender can offer you a better deal, or move to a new provider. You will need to complete an application and the lender will check your credit score.
Remortgaging to release money
A common reason to remortgage is to extend your loan, perhaps to fund home improvements or pay off debts.
If you have successfully paid off some of your mortgage so you have some equity in your home, lenders will often allow you to increase the total. There’s usually an upper limit of 90% loan-to-value. Use a mortgage calculator to explore the costs.
When is remortgaging not a good idea?
In some situations exploring remortgage deals might not be the best plan:
There is a high early repayment charge on your current deal
With fixed mortgages particularly you’re likely to be charged a fee if you end the deal early. This can be a large sum, so it’s usually worth waiting until the end of the term.
Your mortgage debt is really small
If there are only a few thousand pounds left before you pay off your mortgage, changing deals is unlikely to make much difference.
Your circumstances have changed
If your household income has dropped for any reason you might find it more difficult to get a good mortgage deal.
You have little equity
If your home has fallen in value or you haven’t paid off much capital, you will be less appealing to a mortgage lender, so it may be best to stick with your current deal.
You’ve had credit issues
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If your credit score has decreased since you took out your mortgage, you may have difficulty securing a good deal.
You’re already on a great rate
If you have an excellent rate on your current mortgage, whether variable or fixed, it makes sense to hang onto it.
How do I improve my chances of getting a good remortgage?
As long as you’ve reduced your debt since you took out your last mortgage and your circumstances haven’t dramatically changed, you should find it straightforward to get a new one.
There are a few documents you’ll need, so make sure they are valid – especially your passport and driving licence. You will also need recent bank statements, payslips, your P60 and utility bills.
To get the best rates, you’ll need a good amount of equity – which you could top up with a lump sum – and a good credit rating.
What fees are associated with a remortgage?
You may need to pay Arrangement Fees for your new mortgage: a fixed amount or a percentage of the total loan. You can choose to pay upfront or add this to your mortgage.
You might also have to pay Legal Fees, although some lenders offer free legals or cashback to cover legal costs.
How can a Mortgage Broker help if I need to remortgage?
There are a lot of options to consider when remortgaging and it can be tricky to choose the right course. A mortgage broker is a dedicated expert who can guide you.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Debt consolidation is not always the most suitable option, consolidating debts must be carefully considered. It will usually mean more interest over a longer repayment term and there may also be early repayment penalties on your current mortgage, you should think carefully before securing other debts against your home. Consolidating debt may reduce your outgoings now, however you may pay more interest over your mortgage term. Your home may be repossessed if you do not keep up repayments on your mortgage.