The term ‘remortgaging’ is a bit of a buzzword in the property world right now. In the mortgage industry, January is unofficially known as the month most homeowners review their financial fitness and reflect on how they can save money, find a better mortgage deal or raise funds for home improvements.
And, this January is no exception. With interest rates low, here at Mortgage Confidence, we have seen a rise in the number of clients enquiring about remortgaging, what it means and where to start. Which is why we wanted to create a handy guide detailing everything you need to know about remortgaging in the current climate. Plus some tips on how to find the best deal for you – no matter your short-term and/or long-term plans.
What does remortgaging mean?
Remortgaging is nothing new. But in essence, the term relates directly to homeowners who have a mortgage on a property and swap to another mortgage deal with a different lender.
Why do you remortgage?
Just like your broadband package or phone contract – great deals don’t last forever. And the same can be said for mortgage deals. All fixed-rate mortgages come with an end date. A fixed-rate mortgage is where your interest rate remains the same for a set period of time. This could be two, three, five or even ten years in some circumstances. Fixed-rate mortgages offer peace of mind as you’ll know exactly how much you need to repay every month for as long as your deal lasts.
What happens if you don’t remortgage before your term is up?
Once you come to the end of your fixed-rate mortgage, your lender will move you onto a standard variable rate (SVR) mortgage. The SVR is different with each lender. But the SVR is the default interest rate you will be charged if you don’t remortgage before your deal expires. More often than not, SVR mortgages have a higher interest rate than any other type of mortgage. According to the latest stats, average standard variable rates are 2.5% higher than the average two-year fixed rate mortgage. However, SVR mortgages can offer you more flexibility say if you wanted to move imminently without the likelihood of having to pay an early repayment charge.
What can remortgaging help with?
- Avoiding your lender’s Standard Variable Rate – Instead of paying more interest and more money, remortgaging essentially forces you to assess your current financial situation and discover the best mortgage deals for you right now.
- Raising some cash – We all know how quickly things can change inside of a year thanks to COVID-19. And we’re still all feeling the impacts with many of us working from home. So, whether this time has shone a light on home improvement jobs like an extension or given you the urge to invest in double glazing – remortgaging could help you finance the project.
- Reducing your monthly outgoings – something we could all do with! Since your last mortgage deal, times have changed with interest rates at a low. New deals come onto the mortgage market all the time. There might be something better that wasn’t previously available.
- Reducing your overall mortgage term – Just recently our mortgage adviser and director Jo Jingree helped a couple reduce their term by 8 years, but managed to keep their monthly payments the same. This means they are no worse off each month but will be mortgage free much sooner than they’d originally planned.
Where do you start when it comes to remortgaging?
Remortgaging is nothing to be scared of. As you’ve just read, there can be many positives in doing so. But when wondering where to start, we would suggest getting in touch with an independent mortgage adviser. Independent mortgage advisers can source mortgage deals available cross the whole UK market. Whilst tied mortgage advisers are employed either or directly by a bank or building society. And are therefore limited to these lenders.
How do mortgage advisers help?
Mortgage advisers look at your personal circumstances and recommend suitable mortgages for you.
They have the most up to date information at their fingertips and access to lenders you wouldn’t necessarily find on the high street. Essentially, they make the whole process hassle-free.
At Mortgage Confidence we treat all our clients with the utmost care and attention and will always go the extra mile to secure you the best deal. Jo, our mortgage adviser, was listed in The Times 2019 and 2020 Guide to the top rated Financial Advisers. She brings many years of experience to help you secure the right mortgage deal for you.
We offer a free 30-minute consultation. Thereafter, we’d ask you to complete a fact find so we can identify a mortgage suitable for you. Get in touch to find out more.