November 27, 2017
to remortgage, or not to remortgage? that is the question
Very rarely do you take out a mortgage and stick with the same one for the whole term i.e. 30 years, until it is paid off and you’re mortgage-free (oh, the dream!).
Each household is different and there are various reasons why you might look to remortgage. Perhaps you want to borrow more money or maybe you’ve seen a better rate that you’d like to switch to.
Here are some other reasons why you might want to remortgage your home.
Current fixed deal is up for renewal
If you took out a fixed rate mortgage where you pay the same amount every month and the interest rate remains the same, once the initial term has ended (it would have been 2,3,5 years), you’ll fall onto a standard variable rate (SVR) where you could end up paying a higher interest rate than you were previously. This is usually the time when you might look to remortgage in order to switch to a better mortgage deal.
You want to move from interest-only to repayment
Perhaps you’re on an interest only mortgage and you want to move to a repayment mortgage. Generally speaking, your lender should be able to change this for you without the need to remortgage but if they can’t offer you the deal you want, then you might consider a full remortgage.
Want to be on a better rate?
You might want to move to a mortgage that has a better interest rate but sometimes the lender requires you to pay an early repayment charge before you can switch. It’s important to weigh up the price of the early repayment charge (sometimes referred to as exit fee or admin fee) against the costs you’ll be saving with the lower interest rate.
You want to make over-payments
You might have a higher paying job now than you did when you took out your mortgage, meaning you now have more disposable income and can afford to make overpayments, but perhaps your current lender doesn’t allow you to. Therefore, you might want to look at changing over to a new mortgage with a lender who will allow you to make overpayments.
Borrow more money
Moving house can cause a lot of upheaval and can be very expensive by the time you’ve paid for all the fees and moving costs. Choosing to stay put and make home improvements can be a cost-effective way of getting the house you’d like.
In order to cover the cost of the improvements, whether for an extension, loft conversion etc., you might consider remortgaging. Don’t forget to do your research first though and weigh up the pros and cons of paying the early repayment charge, as you might find that a home loan is overall better for you than remortgaging.
Just be aware that your lender will want to know what you intend to use the money for and may ask to see builder’s quotes etc. as evidence.
In contrast, there are also times when we’d advise you against remortgaging…
If you owe your lender more than the property is worth, then you’re in what they call ‘negative equity’. It can be difficult to remortgage your house when you’re in negative equity – unless you have separate funds to repay the difference.
However, don’t just assume this is impossible. Everyone’s circumstances are different, just like every lender’s criteria is different, so it’s always worth speaking with a mortgage adviser to consider all your options.
Finances have dropped
Lenders now have to see evidence of your income against your outgoings and carry out thorough credit checks. So if your income has dropped since you last took out your mortgage (perhaps you only work part-time now or your partner has retired) the lender might be more cautious about lending you the money.
Already on a low rate
It might be the case that you’re already on a low rate and you don’t need to move to another one. Perhaps at that moment in time, there is no better rate than the one you’re on.
Large early repayment charges
If you pulled out of your current mortgage deal before the term is up, it could well come with a hefty early repayment charge which might make you think twice about switching. However, some lenders might be willing to waive the charge if you’re sticking with them and are just moving to a new deal.
Let us take the hassle off your shoulders. Get in touch with us today and we can talk through your different remortgaging options.