Should you remortgage?
Taking out a new mortgage on a property you already own is known as remortgaging. Why should you remortgage? There are plenty of good reasons to take this step – and several good reasons why it might not be the best idea for you. If you’re thinking of remortgaging, check out our guide before making your decision.
Why remortgage?
1. Your mortgage deal is about to end
The most common reason for remortgaging a property is to save money, and if your current deal is almost at an end, it can really pay to shop around. If you’ve been on a fixed rate, discount or tracker deal, your lender will more than likely move you on to their standard variable rate (SVR) which could well be higher than your previous rate. By switching to a different provider, you could get a lower interest rate and save thousands. You should start looking around for the best offers around 3-4 months before your current mortgage deal is due to end.
2. You’re tied into your existing mortgage but want a better rate
If your current mortgage deal is not as competitive as you’d like, it can be worth looking around to see what else if available. However, most mortgage deals charge you early repayment fees if you try to leave early, and these can run into the thousands. That doesn’t mean it’s not worth doing, as your overall savings could be more than the fees. But be sure to do your calculations carefully.
3. You want more flexibility
If your circumstances have changed and you’d like to pay more off your mortgage than your current lender allows, it can be worth switching to a mortgage that permits you to overpay in order to clear your mortgage earlier. Or perhaps you would benefit from one of the more flexible mortgages that allow a payment holidays. Whatever your reason for wanting more wiggle room, there are deals out there for you.
4. You want to increase the size of your loan
If you need to buy a new car, or finance home improvements, remortgaging is one way to raise the cash you need. However, be aware that by adding these new debts to your mortgage, you may end up paying more, for longer. A personal loan or an interest-free credit card might be better avenues to explore.
Reasons not to remortgage
1. Early repayment fees
Early repayment charges can often run into the thousands. Unless your current deal is absolutely terrible, you may be better off waiting until your introductory period is over. Then you can look around for a more competitive rate without having to worry about hefty charges. If you really can’t wait that long but don’t want to incur early repayment charges, try asking your current provider whether they can switch you to a different deal.
2. You don’t have much equity
If you don’t have much equity in your property, either because the value of your home has dropped, or you put a low deposit down when you first bought it, you may find that you don’t qualify for the most competitive rates.
3. Your financial situation has changed
If your circumstances have changed since you last applied for a mortgage, you may find it harder to be accepted for the best rates. For example, if you’ve divorced, had a child, experienced credit problems or become self-employed, you may not fit a new lender’s criteria. In this situation, you may find that you have to stay with your current lender.
Should you remortgage? Remortgaging can be a sensible option for many homeowners, but be sure to do plenty of research before deciding whether it’s the right move for you.
