Is your mortgage deal ending and you are thinking of remortgaging?
When you take out a mortgage, you may have signed up to an initial rate or introductory period. Typically, mortgage deals, especially fixed rates, usually last between 2 - 5 years. When the deal ends, if you do not take action and renegotiate or remortgage, your mortgage balance could then move on to the lender's standard variable rate (SVR). The lender's SVR is usually a lot more expensive than the best mortgage deals that are currently available on the market.
By remortgaging and looking at your wider options, you can potentially avoid a rate hike. This could involve you staying with the current lender and negotiating another deal. This is known as a Product Transfer. Alternatively, moving the whole mortgage balance to another lender could put you on better terms. But wait, that's not the only benefit of remortgaging. Let’s consider some advantages.
You have built up more equity in your property.
If the value of your property has increased since you originally took out your current mortgage, you may have increased the amount of equity in the property thus reducing the loan to value. The loan to value is the proportion of the debt to the value of the property. For example, a mortgage of £250,000 secured against a property worth £500,000 would be eligible for deals at 50% loan to value (LTV). There, with rising house prices you may be eligible for better terms as the amount of equity has increased in the property. The general rule of thumb is that the lower the loan to value, the lower the risk to the lender and therefore the better the rates they offer.
You want to get a better rate.
Currently, if you're on an SVR, because you were on a mortgage deal that ended, remortgaging to a fixed rate could save you money. At this stage, if you are thinking about remortgaging because you've seen lower rates advertised, your mortgage broker needs to check if your current fixed-rate deal carries a penalty for making early repayments. If it does, it could cancel out any savings that the lower payments on a new borrowing deal might give you.
Borrow more money for home improvements
If you want to raise money to pay for property improvements, remortgaging can be a good option, such as renovating a basement or refurbishing a kitchen or bathroom. For this instance, you could end your current borrowing and arrange a new borrowing amount enough according to the requirements for home improvements.
You want to consolidate debts.
If you have outstanding debts that you're struggling to manage, then you could consider using the equity in your property and remortgaging to pay them off. Doing so may reduce your monthly mortgage payment and give you extra time to clear it, freeing up money to repay your other debts. However, if you do this , you need to appreciate that you are securing an unsecured debt.
You want to avoid an upcoming rate hike.
If you're currently on your lender's SVR, any changes to the Bank of England (BoE) base rate could directly affect your monthly payment. This is because lenders usually increase their standard variable rate in line with BoE base rate changes.
Similarly, if you're on a fixed rate that's coming to an end, any upcoming BoE base rate increases may mean that fixed-rate mortgages available to you may become higher than they are currently. In both cases, it makes sense to review your borrowing options. Remortgaging in advance of upcoming hikes may be wise.
The main question you should ask yourself is, will remortgage save you money.
An experienced mortgage broker in the UK will give you a wider picture of the rates and remortgage types available to you. This can open your horizons so you can take advantage of new and competitive remortgage deals in the market that might save you money.
