Remortgaging can be a good idea if you want to avoid the standard variable rate, borrow more money, or pay off your mortgage quicker. It involves switching your mortgage debt to a new lender. You can save money if your new rates are cheaper than your old rates after any fees.
What is remortgaging?
Remortgaging is the process of repaying an existing mortgage debt with a new mortgage. This is typically done to save money with a lower interest rate, or to raise money by borrowing against equity.
Why do people remortgage?
There are many good reasons to look into remortgaging. The two most popular reasons why people choose to remortgage are:
- To save money- in order to lower monthly repayments or benefit from lower interest rates. More than half of all borrowers in the UK are currently paying more than they need to on their mortgage.
- To raise money - to release some of the equity in your home. This could be useful if you wanted to consolidate debts or release money for making home improvements (and adding value to your property).
Many clients who already have a mortgage tend to look at remortgage deals. After the initial fixed rate, your mortgage may revert to a higher rate of interest, meaning you will have to pay more each month. At First Class we contact clients before the fixed rate ends to enable them to either stay with their existing lender with a product transfer or remortgage so homeowners switch to a better deal with a different mortgage provider.
Who can remortgage?
Anyone who has an existing mortgage can look into remortgaging with us - provided that they meet the criteria set by their potential new mortgage lender. Remortgaging might be particularly important if you’ve come to the end of a fixed-rate period, or your discounted deal is coming to an end. While you can stay with your existing mortgage provider, you will probably be put on their standard variable rate (SVR) which may not be the cheapest deal around. In many cases, remortgaging can make a big impact on your monthly outgoings - for example, £75,000 mortgage with a 15 year repayment mortgage from 5.5% to 3.5% you could save £76 a month.
When is a good time to remortgage?
When the deal you’re currently on comes to an end you may have to make much higher repayments. It’s therefore best to start looking at other offers just before your deal comes to an end, so that you can make a smooth transition to a new deal. You may need to watch out for a mortgage exit fee, which is a penalty for leaving your current mortgage deal early. Sometimes a remortgaging deal can make up for the early exit penalty, but it’s worth calculating how much you would have to pay over the remainder of your mortgage if you stay in your current deal versus switching to a remortgage deal.
How long does remortgaging take?
Remortgaging usually takes about a month, as we complete all the paperwork and have a valuation of your home conducted. When the process is complete you’ll be notified with a completion statement.
How do I find the right remortgage deal?
Contact us and we will help you identify which product is best suited to your needs. Please tell us:
- the estimated value of your home;
- the percentage of the value of the property you want to borrow (the LTV ratio);
- your annual income and the income of anyone else who will be named on the mortgage;
It is also useful to get a ‘redemption statement’ from your existing lender, which will tell you exactly how much you owe. These factors are important to figure out what you need to remortgage for: saving money or releasing equity.
We will also discuss with you which type of mortgage you would like to meet your needs and objectives:
- Fixed rate mortgages - with a fixed-rate mortgage the interest rate is fixed for a set period of time, usually between 2 and 5 years. Fixed rate mortgages are good if you want the security of knowing what your monthly repayments will be, but homeowners will not benefit from any potential drop in interest rates.
- Tracker mortgages - with a tracker mortgage your mortgage rate is set at a percentage above the Bank of England’s base rate or your lender’s standard variable rate, so if interest rates go up or down your mortgage repayments will too.
- Offset mortgages - with an offset mortgage, your mortgage and savings account are combined, and the money you have in your savings account is counted as a temporary overpayment towards your mortgage, which could save you thousands in interest. As with a standard mortgage, you can get discounted, fixed and tracker offset mortgages.