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Remortgaging - What You Should Know

What is remortgaging?

Making changes to your existing mortgage is known as remortgaging. Whether this is to move home, change lenders, or simply taking advantage of a better deal with your current lender.

Changing your existing mortgage from an interest-only to a repayment mortgage, however, can usually be arranged by your lender without the need to remortgage.

Finding a good time to remortgage

Timing is the most essential thing to consider when planning to remortgage or more specifically finding the time when your circumstances are most conducive to remortgaging.
Below are some examples of times when remortgaging can be beneficial and therefore it’s a good time to consider it:

Your fixed interest rate is ending

If you have a fixed-rate mortgage, a good time to look at remortgage options is when your introductory period is coming to an end. When it ends, you automatically revert to your lender’s Standard Variable Rate of interest, which is inevitably higher than the fixed-rate, meaning your monthly payments increase.

The Bank of England base rates go up

Whilst the UK base rate is currently very low, at just 0.01% a rise is always possible. Your monthly repayments can be affected by this, so it’s worth considering your options if this happens.

Your property value rises considerably

If the value of your home increases dramatically, this will result in you having a lower Loan to Value amount. Lower Loan to Value amounts will provide you with the availability of more competitive mortgage deals.

Your current mortgage terms don’t allow overpayments

Making overpayments on your mortgage can reduce your payments and/or help you to pay off your mortgage sooner. Many mortgages, however, have terms and conditions which prohibit this. If this is the case for you, you may benefit from remortgaging. Always bear in mind that high exit fees can reduce the financial benefits, however.

You want to borrow more money

Remortgaging sometimes provides a way to borrow money for home improvements or a high-value purchase. It can also be used to consolidate other debts. This is not always the most competitive way to borrow money, so weighing up costs alongside a regular loan is advisable. If consolidating debts, remember your home is at risk if you do not keep up the repayments.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

You want a more flexible mortgage

Flexible mortgage options such as the ability to take a payment holiday are now quite common. If your mortgage does not allow for this, it may be worth remortgaging to obtain this type of flexible benefit.

When is remortgaging not a good idea?

You have high early exit or repayment fees

Most mortgages have early repayment charges. Where your existing mortgage has very large early repayment fees, they can often outweigh the benefits of remortgaging.

You already have a great mortgage rate

Whilst it’s sensible to keep your eyes open for a better mortgage deal if the deal you already have is one of the most competitive rates available, remortgaging is unlikely to be beneficial.

You have low or negative equity in your property

Negative equity means that your property is worth less than it was when you bought it, meaning that you owe more than its current value. Lenders won’t offer remortgages in these circumstances.

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

Whilst it’s not a requirement to remortgage at the end of your current term, you will transfer to your lender’s Standard Variable Rate, which is typically not very competitive and therefore usually leads to higher monthly repayments.

What fees are associated with a remortgage?

Fees for a remortgage are very similar to those charged in standard residential mortgages. There will be the lender’s arrangement fee, legal fees and sometimes you’ll also need to pay additional valuation fees.

A deposit is not required for a remortgage, but it can improve your chances of acceptance, especially where your equity is low.

How can a Vivid Mortgages Broker help?

Here at Vivid Mortgages, we have access to those deals available from independent lenders, as well as the high street, meaning we can often find more competitive remortgage options.

We can also advise you whether or not a remortgage will be beneficial, based on your specific circumstances and current mortgage status.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.  

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