While it is true to say that you can remortgage your home anytime you want, there is really not much benefit to it if your only reason for doing so is to switch from one mortgage lender to another. Timing is crucial to guarantee that you are getting the most out of a new mortgage deal.
In the past, people tended to pay off their mortgage loan using the same lender all throughout the life of the mortgage. These days, this practice is infrequent indeed. It is now more common to remortgage than to stay at the same lender to pay off the loan. The main reason for switching from one mortgage lender to another is to ensure that you are not paying more interest than is actually necessary. So when is the right time to remortgage your home?
Availability of low-interest rates
The housing market is doing considerably well in recent years. As such, you can expect mortgage lenders to offer and promote better interest rates from time to time. A lower interest rate can save you thousands on your mortgage payment.
The amount of equity you have on your house
Equity refers to the portion of the mortgage you’ve already paid off. The outstanding sum of the principal amount remains borrowed. If for example, your home’s value increases, the mortgaged amount will be less than compared with the original property value. The higher equity you have on your home, the better your chances of getting the best deals. To further illustrate, if you own 75% equity in your home, it is equivalent to a 25% deposit when you remortgage. Thus, you could qualify for more attractive and lower interest rates.
When you are nearing the end of a fixed term mortgage
Fixed term mortgages usually run for a set term of around two to ten years. During this time, the interest rate does not change. However, when the term ends, you will be subject to higher variable interest rates. Fortunately, you can choose to remortgage when your fixed term is about to finish. Keep in mind however, that if you remortgage earlier, you may be penalised with high repayment or settlement fees. Nevertheless, you can still check the numbers if the lower interest rate you are taking advantage of will pay off the repayment fees in the long run.
If the new mortgage outweighs the cost of remortgage fees
Remortgage fees can be quite significant. You have to pay for exit fees, legal fees, valuation fees, and arrangement fees among others. If you consider all these fees, work out how much you will save on the new mortgage. If you will save more on the new mortgage and the saving is more than the outright fees, then you are getting a good deal.
All of these factors play a part in the proper timing for remortgaging. You have to plan ahead and shop around for rates before locking in with a new mortgage lender. Online mortgage comparison sites can also help you with finding the best offers available in the market today.