Remortgage

On this episode of the mortgage and protection podcast, we’re talking all about Remortgaging with Paul Crisp from Fiducia Mortgage Solutions.
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What is Remortgaging?

Remortgaging is the process whereby, when you get to the end of your mortgage deal, you look at changing lenders to maybe get a better deal or change products.

When is a good time to Remortgage?

You need to start looking around three to six months before your current deal ends. If you think the interest rates are low or if you’re staying with your current lender, you can start early and save right away. What a lot of people do is keep their mortgage payments the same and take some of the time off their mortgage term, to get it paid off quicker.

It’s always a good time to think about remortgaging if rates are lower, but you might find that your home value has risen, which can mean that the Loan to Value rate, that lenders use to gauge interest rates, has fallen. This can mean the interest rates they can offer you may be better, so it can also be a good time to think about Remortgaging.

You might want a bit more flexibility in your mortgage. For example, perhaps the one you currently have doesn’t allow you to make any overpayments. You might therefore want to change to be able to do that. Equally, if you have a lump sum of savings available to offset against your mortgage interest costs, that may be something to consider.

If you have an Interest-only mortgage with high rates, you might be thinking about switching to a repayment mortgage. That’s a really good reason to Remortgage, because often,  people think that Interest-only is the only option to minimise monthly payments, but if they’re on the lender’s Standard Variable Rate, switching to a repayment mortgage might not cost as much.

Beyond switching deals, you might be thinking about releasing some capital from your home to do home improvements or you might want to use your equity as a deposit to buy a second home.

When is Remortgaging not a good idea?

Really when your situation is the opposite of what we mentioned in the previous question. Also, you might have a really small mortgage, and in those circumstances it might not be worth Remortgaging or changing lenders.

Some lenders will say that if you’ve got less than £20,000 left on your mortgage or less than five years remaining, they won’t accept a new application. In this case you may need to consider a product switch.

You can’t really Remortgage it if you’re locked into a deal, as you might have early repayment penalties. If interest rates are really low, you have to weigh up the options of paying off the penalties versus the lower interest rates. You definitely need an advisor to look at those different options, as it can be quite complicated to work out whether it benefits you or not.

A change in circumstances might make it difficult to Remortgage. But instead you can do a product switch, which is staying with your current lender but getting a better deal. This might be that you’ve gone from being employed to Self-Employed, your home might have gone down in value, or you might have missed some payments on credit commitments. It’s important to talk to an advisor because you need to be sure you’ve looked at all of the options.

What Remortgage options are available?

It’s very similar to when you bought your home, in terms of finding out what the right solution is for you. Everybody’s circumstances are so different, so the best option will vary.

Why Remortgage at the end of a Fixed-rate deal?

If you don’t remortgage, when the deal ends, your lenders will put you onto their Standard Variable Rate, which is usually a higher rate than what your current deal is, so your monthly payments are going to go up.

That interest rate is also a variable rate so it could increase further, if interest rates change. So it’s really important to fix it before you get to that point. The only bonus would be if you wanted complete flexibility, because there are no penalties on a Standard Variable Rate,  you can make overpayments, for example.

How do I improve my chances of getting a good Remortgage?

Using a broker, like ourselves as an intermediary. If you go to your bank they can only offer you their own deals, whereas a broker can access all of them. So to improve your chances of getting a good deal, speak to a broker and shop around.

What fees are associated with a Remortgage?

There will be solicitors costs, because the deeds will need changing from one lender to another. The lenders might charge fees as well, such as application or product fees, although they can often be added to the loan. The lender might want to do a valuation on your home, even if you’re staying with your current lender, which can incur another cost. And finally, there might be a cost if you are using an adviser, but it’s worth having that advice to get the most suitable deal.

What would be the key takeaway from this episode about Remortgaging?

The key is to use an adviser to shop around and review the market on your behalf. They can find the right deal for you. If your situation has changed, that’s another great reason to speak to an adviser to find the most suitable solution for your mortgage.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage

Why choose Fiducia Mortgage Solutions?