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Remortgaging is essentially switching from your current mortgage product to a new one. This could be via your current mortgage provider or a new one.

There are lots of options on the market when it comes to interest rates and borrowing from lenders. This can be generally quite confusing if you’re looking for the best deal, which may lead you to be quite tempted to stick with what you know. However, doing so might just be losing you money.

Any changes to the interest rates have a significant impact on how much you pay each month especially if your mortgage is on a variable rate. If at the time the rate is low it might be good for the short term but throughout your whole mortgage, you could pay substantially more than you need to.

Although lenders try to stay competitive once they lock you into a mortgage deal, they could end up charging you much more than you expect or are prepared for.

Your first mortgage will have an initial scheme period of fixed or variable interest, in most cases, 2 to 5 years at the start of your deal. Unfortunately, once the initial scheme ends you could be facing higher monthly payments on the lender’s standard variable rate. Remortgaging with a new, or your existing lender, is an effective way of saving you money.

Not only does a higher rate affect how much money you could be spending on interest, it also affects the equity you can gain on a repayment mortgage by decreasing the capital erosion element of the mortgage, making it a greater cost to pay off.

Every mortgage has a limit to how much you can borrow when compared with the current value of the property. This is called the loan to value which is shown as a percentage. When you remortgage, in an ideal world you would want to have a lower loan to value to allow you to obtain the more attractive rates.

You can remortgage at any time, however, but this could lead to an early repayment charge being payable, but still work out financially advantageous dependent on your current interest rate. Dependant on market conditions, breaking an early repayment charge when a lower rate is available can be advantageous however in all instances you should speak to a Mortgage Expert to ensure you are doing the right thing.

The best time to begin your search is around 6 months before the end of your current deal and secure a new rate ahead of the existing one expiring, seamlessly moving your current rate to the most advantageous interest available. There are many factors to take into consideration when choosing the right rate for you including the rate of interest and any fees that might be included with the chosen product along with costs incurred during the process.

Get in touch today as we can advise you on the best deal for you. Call 01225 962 532 and talk to one of our knowledgeable advisors.

Written by Elliot Cotterell

*Please think carefully before securing further debts against your home*
*Your home may be repossessed if you do not keep up your mortgage repayments*
*You may have to pay an early repayment charge to your existing lender if you remortgage*

Sources:

https://www.uswitch.com/mortgages/guides/is-remortgaging-worth-it/

https://www.moneyhelper.org.uk/en/homes/buying-a-home/remortgaging-to-cut-costs

https://www.thetimes.co.uk/money-mentor/article/remortgage/