Most homeowners take out a mortgage when they buy their property, and for most people, this is their biggest financial commitment. You don’t have to be tied to your first mortgage agreement however, and remortgaging deals can save you money in some circumstances.
This quick guide to remortgaging will give you the bare-bones facts about managing your most significant outlay, and direct you to independent and reputable sources to find out more.
What Actually is Remortgaging?
Most of us will investigate the cheapest providers for our financial commitments, whether it’s your broadband provider or your weekly food shop, and your mortgage should be no different.
The initial terms of your mortgage deal may only have been on offer for a few years, after which your monthly repayments may increase. Remortgaging when your current deal ends can help you to keep your repayment costs low.
Why Would I Want to Do That?
There are many reasons why you might want to consider remortgaging. It might just be a matter of routine if your current deal is about to come to an end, but there are other reasons too, and we’ll talk about a few of the most common in this section.
A Positive Change in Circumstances: If the value of your home has significantly increased since taking out your mortgage, you may be able to find a much better deal.
Conversely, if your earnings have increased or you’ve had a windfall of some sort, you might want to be able to pay off more of your debt than your current deal will let you. Remortgaging can be a way of reducing your loan size in these circumstances.
Borrowing More or Consolidating Other Debts: Remortgaging with a new lender might allow you to borrow at a lower rate than with your current provider, or maybe your current provider has refused to lend you additional cash.
Remember that lenders will ask why you need the loan and for evidence that it has been used for that purpose. If you’re paying off other debts, you will need to prove it to your mortgage lender.
Although this can work out, you should be careful that consolidating debts in this way isn’t actually costing you more money. Borrowing over a longer term, even with a lower interest rate, can be more expensive in the long run.
Could This Save Me Money?
In most cases, yes. By choosing the right mortgage deal, you could save money, sometimes thousands of pounds.
However, there are many circumstances where this might not be the case, and you should always weigh the pros and cons before jumping into a new deal.
One of the biggest potential pitfalls in terms of savings is that remortgaging isn’t cost-free. Your existing mortgage lender may charge you a fee for exiting your current deal, and your new lender may charge you for arranging a new one. You can find a comprehensive guide to remortgaging fees here.
If you are struggling with your mortgage repayments, remortgaging may not be the best choice for you.
If your financial circumstances have worsened since your first mortgage agreement, you’re unlikely to get a better deal, but it’s still a good idea to speak to a professional about managing your debt.
Where Do I Start?
If you think you might benefit from changing your mortgage provider or from switching rates with your current provider, it’s best to speak to an expert.
A mortgage is a complicated financial arrangement, and the market is huge. By seeking the assistance of a reputable, independent, and FCA registered mortgage broker, you can ensure that you get the right mortgage for your circumstances.
Having an expert help you also gives you additional protection if something does go wrong. The Financial Ombudsman Service (FOS) is a free service that can settle any complaint you have with your lender or broker.
For more information about remortgaging or any other mortgage questions, please contact our team of mortgage experts.