Remortgaging: When it's the right option for you

Jun 08, 2018
When is remortgaging the right option?

From time to time, it’s a good idea to review your current mortgage and shop around for a better deal. But how should you go about remortgaging your home and finding the option that’s right for you? When should you remortgage, and what should you consider before you take the plunge?


When is a good time to remortgage?

Remortgaging can be a great way of cutting the cost of the biggest debt you are ever likely to have, but it’s not always an opportune moment to shop around for a new deal. Here are some scenarios where remortgaging could be a good option for you.
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1. When your current mortgage deal is about to end. If you’re on a tracker or fixed rate mortgage, for example, your deal will normally last somewhere between two and five years, after which point you’ll revert to an ongoing rate which is usually your lender’s standard variable rate (SVR) or other variable rate. These rates will generally be higher than the one you’ve been on and so you could save money by switching when your deal comes to an end. If you’re in this situation, make sure you plan ahead and start looking for a better deal a few months in advance.
2. If you are already on a SVR. If you are already on your lender’s SVR you are almost certainly paying too much, so you should investigate remortgaging as soon as possible.
3. When there has been a change in your circumstances. If you’ve recently been through a separation, bereavement, have seen your income rise or fall, you might want to consider remortgaging. If you look to switch your mortgage during your mortgage scheme period, you will most likely have to pay an Early Repayment Charge (ERC) which needs to be factored into your calculations. If, for example, your property value has increased which means you fall into a lower loan to value (LTV) band, you may be able to switch to a more competitive mortgage deal, but any savings will need to outweigh the ERC to establish a true saving. A mortgage broker can help you understand your options if your circumstances change.
4. You’ve spotted a better deal and think you could improve on your current mortgage rate. Although you may owe an ERC or a smaller exit fee for bowing out of your current mortgage deal, it’s still worth weighing it up against the savings you could make on a different deal. Make sure you shop around to find the best deal or use a mortgage broker to help you.
5. If the equity in your home has increased. If you bought your current home with a relatively small deposit and have been making regular monthly repayments of capital, you may have increased the equity in your property if house prices have either stayed the same or grown. This puts you in a stronger position and could mean more competitive mortgage rates are available to you.

What next?

If you want to investigate further, there are lots of ways to find out more about remortgages, such as going to a Mortgage Adviser who will offer you advice and deals from across the market. Staying up to date with the latest deals on impartial financial advice sites and reading the mortgage news will help you to understand what your options are, while remortgaging calculators can help you understand what savings you may be able to achieve.
Before you take the plunge, make sure you:
●        Find out if you’ll be charged an exit fee or an early repayment charge on your current mortgage
●        See what your current lender will offer – but always compare that to what you could get elsewhere
●        Research different mortgage types, and seek impartial advice on what will work for you If you decide to go ahead with remortgaging, make sure you plan well in advance and do as much research as possible.
This guide to remortgaging was produced in collaboration with L&C, the UK’s leading fee-free mortgage experts.