When you take out a mortgage it will last until you have paid it off in full, usually over a period of between 20 to 30 years. However you can change your mortgage or your provider during this time, this is known as remortgaging. Here we take a look at when and how to do it.
When to consider remortgaging
Most mortgages include an initial period, usually between two and fives, in which you are charged a discounted interest rate. If you want to leave during this time you will have to pay an early repayment charge (ERC).
Once this period is over, you will be moved on to your provider’s standard variable rate (SVR). This is likely to be more than the discounted rate you previously enjoyed, which is why most people choose this moment to remortgage.
There are other occasions when you might consider remortgaging. For example if you would like to borrow more money to fund a large outgoing, such as an extension, or if you are moving home and cannot take your current mortgage with you, known as porting. Or perhaps you are able to repay a significant amount, which you cannot do under the terms of your current mortgage.
Wider economic changes can also impact your decision. If the value of your home has risen significantly you may be able to access a cheaper category of mortgages because your loan-to-value ratio has reduced. The best interest rates are usually available to people borrowing less than 60% of their home’s value. Equally, if the Bank of England reduces interest rates it could mean you can get a better deal elsewhere.
However, if you are still in your initial deal period you need to weigh up whether a better rate will make up for having to pay an ERC and the fees providers often charge to set up a mortgage.
How to remortgage
Here are the steps you should take:
- Start early – Finding a new mortgage and jumping through the various hoops needed to get an offer can be time consuming, so get the ball rolling as soon as possible. You can get an offer in place months before your current deal ends.
- Talk to your current provider – The easiest way to remortgage is with your current lender. As long as you are up to date with your repayments you can usually move on to their best deals without proving your incomings and outgoings if you are not trying to borrow more.
- Research the market – Even if your current provider offers you a good deal, it’s worth checking what else is on offer. There are plenty of comparison tools available online or you can ask a broker to look for you, they will also help you through the process of remortgaging.
- Get your financial details in order – If you decide to remortgage with a new provider you will have to go through the same rigorous checks as when you first took out a mortgage. So gather all the details you’ll need, such as your income and expenditure and your credit report which is available for free. Doing this before you start the process will give you a good idea of the likelihood you’ll be able to take out a mortgage for the amount you need.
- Double check the details – When the deal is ready to sign make sure the start date is correct – you don’t want to risk incurring an ERC unnecessarily. Also check the exact amount owed on that date is accurate so you do not have a shortfall to make up.
Should you remortgage?
As we’ve mentioned there are lots of things to take into consideration when you remortgage your home. Such as the cost of an ERC and the large fees that are often applied to a new mortgage deal.
If you are borrowing more money, it’s also worth calculating whether repaying that amount over the long period of a mortgage is cheaper than paying it off faster but at a higher interest rate.
If your circumstances have changed, for example you are furloughed or have moved from employment to self employment – or if the value of your home has dropped and it is in a higher loan-to-value category – you may struggle to find a better deal than the one you have.
Working with us
In some cases you may not be able to access a better deal, leaving you with a mortgage you cannot afford. In this situation selling your home could be a good option.
We can buy properties in just seven days if necessary, so that you can quickly realise the value locked in your home. And because we buy using our own cash funds, we are never part of an unpredictable chain of transactions that so often break down. That means we do not put your home on the open market so there are no estate agent’s fees to pay.
We aim to make the process as stress free as possible, which includes instructing and paying for solicitors. If you’d like to chat about how we can help you, please get in touch.