What’s your largest financial outgoing? Well, if you’re lucky enough to own your own home, it’s probably your mortgage? But why would you pay more than you need to? If your existing mortgage deal is due to end you now have the chance to review your finances, take a closer look at your largest outgoing and think about a remortgage.
The term remortgage simply means moving your mortgage from one lender to another. This is typically done when your current fixed rate mortgage comes to an end. Beware! If you take no action, your lender will usually place you on to the Standard Variable Rate. You will then find your mortgage payments increase.
As rates are historically at an all time low you may want to seek some advice even if your rate is not due to end. Some people may find it cost effective to leave their current deal early and secure a lower interest rate.
As a member of the LGBT+ community I am here to offer my services in non-judgemental environment.
So why would you Remortgage?
To save money.
It’s recommended that you should begin to seek advice about a new deal around three months before your current deal is due to end.
Lenders are currently in a “rate war” so now is the time to take advantage: you will almost always save money.
If you have a mortgage balance of £100,000 over 25 years @ 3.64% (average Standard Variable Rate Oct 2021) payments could be as high as £520 a month
With a two year fixed rate at 1% (average two year fixed rate October 2021) payments can drop to £370 a month.
This will deliver a huge saving of £3,600 over two years and with energy prices due to rise and an overall increased living cost, why not save money where you can to offset these increases?
Do you want to borrow more money?
Your existing lender may have declined additional lending, or the terms may not be very favourable. Looking to remortgage can allow you to borrow any additional money for home improvements.
Increased value of your home.
With the increase in property prices, are you able to take advantage of a lower rate? You could find that you have a lower Loan to Value from when you originally bought your home. Your loan to value is how much you owe against the value of the property: usually, the lower this, is the lower the interest rate.
Can you afford to review your budget?
Remortgaging is a good time to review how much you can pay towards your mortgage, and remortgaging over a shorter term can help you save on the overall interest you will pay.
How much does it cost to remortgage?
You do have the option to stay with your current lender and simply complete a rate switch. This may be a cheaper option when it comes to fees but may not always be the most cost effective solution so it’s always good practice to seek advice from a qualified advisor…like me!
If remortgaging is the right option to take then consider
- The broker fee. This covers the cost to find the right deal based upon individual circumstances. Your broker will complete the application ensuring it is submitted to the lender with the correct documents and then manage the application through to completion, liaising with the lender, valuer and legal team.
- Valuation fees. This can be charged by the lender to carry out a valuation on your home. Some lenders offer a fee free service so its definitely worth asking the question before you look to proceed.
- Arrangement fees. The most attractive rates often have arrangement fees. This may not be your best option so the help of an advisor can be crucial.
- Solicitors’ fees. This is the cost of managing the transfer of funds as well as the change to the title (deeds) to the property. Most lenders cover this cost as an incentive to move to them, again something to check with an advisor.
Is it right for me?
Remortgaging is not the right solution for everyone when their deal has ended. It could be that you have adverse credit and staying with your current lender may be the best solution. Your employment status may have changed, or if you have a small amount or no equity in your home, you may find little difference between staying with your current lender and looking to move to a new one.
As a Mortgage and Protection Advisor I know the pitfalls so it’s worthwhile having a conversation with a professional advisor to discuss your circumstances to establish what’s right for you.
Click HERE to contact Michelle for free advice.