What is a remortgage?
Remortgaging means moving your current mortgage to a new lender whilst you remain in the same property. The main reason to remortgage is to ensure you are not paying more than you need to. Moving to a new lender with different interest rates could save you a lot of money in the long run so it is worth considering. You could remortgage to fixed your monthly repayments for a certain period of time – this will ensure your monthly repayments will remain the same during this time. Many people also remortgage to raise capital to pay for home improvements or consolidate their unsecured debts. When can I remortgage depends on quite a few things.
So when can I remortgage?
It may be worth considering to remortgage if:
- You’re coming towards the end of your existing deal.
- You would like to take some money out of your property (equity release)
- You’ve had your current mortgage for a long time and interest rates are now significantly lower
- Switching lenders and mortgage deals would be financially better for you in the long run – including associated costs such as paying an early repayment charge. We can do the maths for you and advise whether it is better to stay with your existing lender or not depending on your individual circumstances!
Are there fees involved when remortgaging?
Yes, there may be various fees payable when you remortgage. These could include the following:
- Arrangement / Product Fee – for your new mortgage deal
- Mortgage Exit Fee – to leave your current mortgage deal
- Early Repayment Charge – to exit your current mortgage deal
- Valuation and Legal Fees
Should I consolidate my debts?
Many people consolidate their debts to put them into one place with a lower interest rate – your mortgage. This is done by remortgaging and using the capital raised to repay your other debts.
It it worth noting that you may pay more in interest for consolidating these debts in the long run, over the term of your mortgage. Your mortgage is also secured against your home and therefore if you do not keep up with your monthly repayments, it may be repossessed.
We are here to evaluate your circumstances and advise whether it will be financially beneficial for you to consolidate your debts whilst remortgaging.
How much equity do I need in my property?
Equity is the amount of your home that you own outright i.e. the amount that is not mortgaged. The proportion of equity to the amount mortgaged is called the Loan to Value Ratio.
The lower the loan to value ratio, the better remortgage deals will be available to you. However the majority of lender will be willing to lend up to 90% loan to value which would mean you would only need 5% equity in the property in order to remortgage although it may be worth waiting until you have built up more to ensure you get a better deal.
We can advise on the best options available to you.
Do I have a good credit history?
It is worth find out your credit rating/score as this is what mortgage lenders will look at whilst they are assessing your application. The lower the score, the few mortgage options you may have.
We can advise on the best lenders to approach based on your individual circumstances.
What type of mortgage do I want?
There are two main extensive categories that mortgages fall into – fixed rate and variable rate. The amount of interest you pay will depend on which type of mortgage you go for.
The interest rate on a fixed rate mortgage is secured and will last for a certain period of time, usually 2, 5 or 10 years. You will be fixed in for duration of the product and if you wish to leave earlier, you will incur an early repayment charge.
With a fixed rate mortgage, you will know exactly what your monthly repayments will be for the period of the product as the interest rate will not vary regardless of other rates.
The interest on a variable rate rises and falls as changes in interest rates occur.
Your monthly mortgage repayments are most likely to fluctuate whilst being on a variable rate unlike those on a fixed rate for example meaning your mortgage repayments could be different each month.
The rate you will pay is entirely dependent on your mortgage lender, with some changes being affected by the Bank of England Base Rate.