If you haven’t reviewed your current mortgage in a while, you could be paying more than you should.
For the majority of people, their mortgage is one of the biggest financial commitments they will make, which means that saving money on mortgage repayments can make a huge difference to your pocket.
So the first benefit of remortgaging is:
1. Save money by switching to a cheaper deal
You are most likely considering changing your mortgage because you are coming to the end of your current lender’s mortgage deal and wondering what to do next. There are essentially two choices, switch on to a new product with your current lender or shop around and find a deal from a new lender with more competitive rates.
Its important to look at all the costs involved such as lenders’ fees such as arrangement fees, booking fees, valuation fees and legal fees. Look at the costs of these fees over the initial deal period of the new mortgage product whether that may be 2,3 or 5 years.
You may already be out of a deal with your current lender and on to their standard variable rate, which is usually much higher than a new deal, so it’s definitely worthwhile finding a new deal. However, if you are currently tied in for a number of years then you will have an early repayment penalty to pay and in this scenario, it may not be worth moving lenders until this deal has expired.
It’s best to start looking at switching around 3 or 4 months before your current deal ends as this will give you enough time to set up the new mortgage as this can take some time.
2. You want to fix your mortgage repayments
If you are on the standard variable rate with no early repayment penalties, and you are uncertain about the current economic climate, then it could be a good time to start looking at fixed-rate mortgages as these are still very competitive.
If you are on a variable rate such as a Tracker mortgage that has early repayment penalties, then you will need to weigh up whether it’s worth paying the penalty for the extra certainty.
Some mortgage lenders will allow you to Switch to Fix without incurring the penalty charge but only if you choose a fixed rate with them.
3. You can benefit from the increase in your house value
If you know that your house value has increased substantially (perhaps you have completed significant home improvements) then you may benefits from a lower loan to value. This means that you could have access to a lower interest rate and therefore save money on your repayments. Again, check whether or not you are tied into your existing deal to ensure its worthwhile switching.
4. You want more flexibility
If you have surplus cash available every month, and you are a regular saver, then you may benefit from a more flexible mortgage such as an Offset mortgage.
If you want to make substantial over-payments, then again, you may require a greater amount of flexibility than your current lender can offer you.
Most lenders will allow you to overpay up to 10% of the outstanding balance, but this is lender-specific so double-check before you decide to make an over-payment without incurring a penalty charge. There are mortgages available that will allow you to make greater over-payments without incurring a penalty.
5. You want to borrow more
The most common reasons why you would want to borrow more would be for home improvements or paying off existing debts.
If you are tied in with your current lender and have penalties to pay it may be best to approach your current lender, however, if you are coming to the end of your deal then it would be a good time to see if you can borrow the whole amount with a new lender on a lower rate.
Borrowing the additional funds on the mortgage can help reduce your monthly outgoings but you could end up paying more interest overall because you will be spreading the debt over a longer period of time.
Should I see a mortgage adviser?
Remortgaging can be quite complex, particularly when you are considering borrowing more to pay off debts or for home improvements.
By getting expert advice, you will be given specific guidance on what your options are and the effect this will have on your finances in the long term as well as the short term.
By getting independent mortgage advice, you will have access to thousands of deals, ensuring you are getting the best mortgage tailored to your personal circumstances.
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