Should you remortgage?

should you remortgage

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You can massively deduct costs by switching your mortgage. Let’s discuss what remortgaging is and how you could benefit from it. 

What is remortgaging? 

A remortgage is when you take out a new mortgage on a property you already own. People often decide to remortgage to either replace an existing mortgage, or to borrow money against your property. Around a third of UK home loans are actually remortgages. 

Why you SHOULD remortgage?

The biggest reason for remortgaging is often to save money. Here are some of the reasons why you might consider a remortgage. 

  • If your current deal is about to end

Many of the best mortgage deals only last for a short period of time – between two to five years. When it comes to an end, your lender will often put you on its ‘bog standard’ variable rate. It’s likely that your new mortgage deal will be higher than your old interest rate. If this is the case, you will want to consider remortgaging to a cheaper rate. It is best to start looking for a new deal around 14 weeks before your rate ends. 

  • Your home’s value has gone up considerably

If the value of your house has gone up a lot since you last took out your mortgage, you may discover that you’re in a lower loan-to-value band. This would mean that you’re eligible for much lower rates, and therefore it is worth you looking into remortgaging.

  • You want to overpay, and your lender won’t let you

If you’ve had a pay rise or inherited some money, you may now want to put some extra money towards your mortgage. However, you may be in a position where your current deal won’t allow you to do this or might only let you make a small overpayment.

A remortgage will allow you to reduce the loan size and potentially result in a cheaper rate. Just be careful and look into any early repayment charges or exit fees and remember to compare this to how much you’d save with a new, lower mortgage. 

  • You want a more flexible mortgage 

Some mortgages will allow you to take payment holidays. So, whether you’re changing jobs, going back into education or going travelling, a flexible mortgage will allow you to miss some payments. 

However, if you are looking for flexibility in your mortgage, expect to have to pay for these features with a slightly higher interest rate. A flexible mortgage is not worth it unless you actually use the benefits that come with it. 

Why you SHOULDN’T remortgage?

  • Your mortgage debt is really small

If your mortgage loans fall below a certain amount, for example £50,000, it might not be worth getting a remortgage. This is because remortgaging often requires switching lenders, and this means you are less likely to make any savings. You will find some lenders don’t take on mortgages below £25,000. 

  • You have very little equity 

If you’re looking to borrow more than 90% of your property’s value, then you’ll find it more difficult to find a better rate. Although, with the government’s latest announcement on the 95% mortgage scheme, we will begin to see more and more higher mortgages. 

Always remember to check if your current lender charges an early repayment charge to leave. 

  • You’ve previously had credit problems

Since the pandemic, lenders are becoming pickier about who they lend to. Affordability checks are carried out to check the mortgage is affordable, not just at the current rates, but at a higher rate too. This ensures that the borrowers will be able to cope if interest rates were to rise.

Lenders often require a lot of details about your outgoings and are looking for a clear repayment history and handling of debt. Therefore, if you struggled to get your existing mortgage due to credit problems, you may find it just as difficult, if not more, to get a remortgage. 

  • The early repayment charge is large

If there is a large early repayment charge on your existing mortgage, it could mean that you wouldn’t save much, or anything, by getting a remortgage. Always do your sums and work this out first. There are online calculators that allow you to do this. 

It may be worth speaking to your current lender and discuss switching to another one of their deals by paying a reduced early repayment charge. It isn’t likely that they’ll move you to their best deal, but it may still be better than your current one.

You may have to pay an early repayment charge to your existing lender if you remortgage.

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

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Barfield Financial Advisors | Mortgage, Investment & Insurance Advice

Let us find the right mortgage for you…