The cost of living is really beginning to hit home. There are estimates that households could be looking at energy bills of £3,000 per year, before even considering the cost of rising inflation and interest rates.
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What’s more, if you have a mortgage, there is a chance you could be unknowingly paying over the odds. Following an initial fixed rate, most mortgages switch to Standard Variable Rates (SVRs), which ‘track’ interest rates month-to-month. However, while these rates are notoriously expensive 800,000 households have expired mortgages and are sat on SVRs.
Remortgaging can be a bit intimidating, but our guide will talk you through everything you need to know.
What is a remortgage?
In a nutshell, remortgaging is when you swap your current mortgage for a new one, either with your current lender or a different one.
It is important to bear in mind that your home may be repossessed if you do not keep up repayments on your mortgage.
How do I remortgage?
It can take a few weeks to several months to remortgage, depending on your situation and it’s a good idea to start looking for a new deal about 4 to 5 months before you need one. If you find a good deal, the lender will reserve it for you until your current deal ends.
Typically, there are 4 key steps to consider when remortgaging:
Check for charges
You may have to pay an early repayment charge (ERC) if you remortgage before the end of your initial period.
Read your Credit Report
Your credit report helps a lender decide whether to give you a mortgage.
It’s a good idea to look at your credit report before you remortgage.
Find out how much your home is worth
Your home might have gone up or down in price since you bought it. Ask an estate agent to value your home or check a property website.
This will give you a more accurate figure to use when you look for deals.
Get a new mortgage
You can find remortgage deals by:
- asking your current lender
- using a comparison website
- speaking to a mortgage broker
Why consider remortgaging?
We’ve already talked about the money aspect, but there are several other advantages to remortgaging –
- Fix your monthly mortgage payments – You could switch from a variable rate to a fixed rate mortgage for stable monthly payments.
- Get a more competitive interest rate on your mortgage – Some mortgage deals offer a lower interest initial period. When that period ends, you may be able to get a better deal by remortgaging.
- Get more flexibility with your mortgage – Some mortgages are more flexible, which may suit your current needs. An offset mortgage lets you offset any savings interest against mortgage interest.
- Remortgage for debt consolidation – Interest rates on mortgages are usually lower than those on credit cards and other loans. So it may be worth combining other debts into your mortgage. It’s not always a good idea to do this, however. You might get a lower rate, but if you increase the length of time you pay back the loan it could cost you more in the long run.Discuss your options with a mortgage broker or financial adviser before you make a decision.
- Remortgage for home improvements – If you’re considering home improvements, remortgaging can help you get extra funds. Making improvements that add value to your home could also be a good investment in the long run. Increasing your mortgage balance is likely to increase how much you pay each month and decrease the equity in your property. So speak to your mortgage broker to find out if this is best for you.
- Remortgage to release equity – If you need to free up some capital, you could release some equity in your home by remortgaging. You can then use the funds for things such as helping your children with a house deposit of their own. Increasing your mortgage balance is likely to increase how much you pay each month and decrease the equity in your property. So, speak to your mortgage broker to find out if this is best for you.
- Adapt to a new financial situation – If you get a pay rise, or need more money for some reason, remortgaging could help you find a deal that’s better suited to your new needs.
- Remortgage to buy another house – If you want to get a second home or a buy to let, you could remortgage to raise the money for the deposit. Increasing your mortgage balance is likely to increase how much you pay each month and decrease the equity in your property. So speak to your mortgage broker to find out if this is best for you.