Why Bother Remortgaging?
Have you ever thought to yourself, "Why should I bother with remortgaging? Isn't it just a hassle when there are better things to do?" Well, we're here to explain why it's definitely worth your time. Read on to discover the essentials.
Why Remortgage?
Your mortgage deal is about to expire, or maybe it already has. Why should you go through the process of remortgaging? Understanding why it's crucial to remortgage at the right time can greatly impact your financial well-being!
When you initially got your mortgage, it was for a set term, say 30 years, with a special deal for a portion of this time, like a two-year fixed rate. What happens when that fixed-rate period ends? Is remortgage advice necessary? Should you consider your options and remortgage? If you choose not to, are you still tied to a mortgage after two years? These are valid questions, and below we try and tackle some of these for you:
Avoiding the Standard Variable Rate (SVR) with a Remortgage:
If you decide to do nothing, your mortgage will default to the lender's Standard Variable Rate (SVR), which is typically much higher. This can result in a significant increase in your monthly payments. To prevent this, you need to act before this change occurs. Remember, the remortgage process may take some time, so start early.
At Tuckers Financial, we reach out to our clients 4-6 months before their deals end, securing the best mortgage products ready for when their current arrangements conclude.
Remortgage as Your Fixed Rate Expires:
Initially, you may have opted for a fixed-rate deal to have the certainty of a set monthly payment. The thought of your mortgage increasing unexpectedly might not have been appealing, making the fixed rate seem like the right choice. But if you do nothing after the fixed rate ends, you may find yourself facing the very scenario you wanted to avoid—your interest rate could rise unexpectedly!
Moving to the lender's SVR brings instability. Payments can change at any time, unrelated to the Bank of England's base rate, leaving you in a precarious financial situation.
Remortgaging: A Chance for a Review and Change:
Remortgaging offers a fantastic opportunity to review your situation. This review might lead to some beneficial outcomes, such as shortening your term, paying off your mortgage faster, and potentially saving thousands in interest payments.
Remortgaging isn't merely about securing a new fixed rate or a better deal. You might want to borrow more money, perhaps for debt consolidation or home improvements. A lot can change in your life since the original mortgage, so use this review period wisely. An independent mortgage broker can provide significant help and highlight any potential risks.
Can a Remortgage Have a Positive Impact?
You might be in a position to overpay and reduce your mortgage balance. Even a small amount can make a significant difference, so consider this when remortgaging. Remember, your circumstances might have changed since the initial mortgage. If possible, take advantage of this opportunity.
Several options could lead to a positive impact. For instance, you could shorten the term to pay off the mortgage faster. However, if finances have become tighter, you could extend the term to lower payments. The terms of your new mortgage don't have to mirror the old ones. This is the perfect time to make necessary adjustments.
Remember, even if nothing else changes, securing a better interest rate can still be hugely beneficial. So, when the time comes to remortgage, seize the opportunity. It can make a substantial positive impact.
Doing Nothing Can Be Costly
While mortgages might not be the most riveting subject, and likely not high on your to-do list, it's an important issue that could significantly affect your financial well-being. Do not ignore it. Take time to review your options or enlist the help of a professional mortgage adviser to do it for you. They can help you understand your best options.
Bear in mind, independent mortgage brokers, such as ourselves, are regulated by the Financial Conduct Authority (FCA), ensuring you always receive the best and most suitable advice.
How to Remortgage
Knowing why remortgaging is important is one thing, understanding how to go about it is another. Here are your options:
Review your Mortgage with an Independent Mortgage Broker:
An independent mortgage broker can save you time, money, and manage your mortgage, both now and in the future. They offer independent advice, recommend the best remortgage deals for you, and assess all your options, including those with your current lender.
Product Switch with Your Existing Lender:
If your lender offers a good deal, you could switch, thereby avoiding the SVR. However, remember that not all lenders offer this, and there may be better options in the wider marketplace. Other lenders will want your business and may offer attractive deals to entice you.
Remortgage to a New Lender:
Exploring the whole market is critical to secure the best mortgage deal. The savings you make from finding the best deal could be significant.
Final Remortgage Thoughts!
Don't become complacent just because you already have a mortgage. Make sure to consider all options rather than accepting the first deal offered to you. The difference between getting any deal and the best deal could equate to several holidays or potentially even more!