Remortgaging can fulfil a variety of needs. From releasing equity to pay for the things we love, to reducing the time it takes to pay our debt in full, many of us will consider a remortgage at some point in our home owning lives.
Ultra-low interest rates have driven a surge in remortgage applications, with 120 per cent more applications last winter than there were in 2014. The reports of massive savings and reduced mortgage terms is enough to send us all running to the lenders for quotes, but it’s important to think things through when it comes to a mortgage.
A mortgage is unlike any other form of lending; it’s the one biggest purchase most of us make in our lifetime, and is something we’ve got to live with for many years of our lives. Added to this is the ongoing concern that if we get it wrong, we could end up homeless. With all this in mind, it’s clear that a remortgage should be undertaken with the utmost care and consideration.
Here are the questions you should be asking yourself, and your lender, before entering into any kind or remortgage deal:
Is this the right time to remortgage?
Depending on your situation, it could be a great time to remortgage, or a really bad one. If you’re in a good value mortgage deal already or have big penalties to pay if you leave, chances are it’s not the right time to switch. However, if you’re at the end of your current deal, are on a fixed rate which is no longer good value, or want to release some of the equity from the house, it could be a good time to consider a remortgage.
How much is this going to cost?
Unfortunately, nothing in life comes cheap, and the same goes for your remortgage deal. Aside from any exit fees you might have with your current lender (be sure to check these out thoroughly before going any further), there are several other costs associated with remortgaging. For example, you’ll need to pay an arrangement fee to join a new lender, will need survey and legal fees and there may be other administrative costs to cover depending on how your lender is set up.
Will I be able to get a good / better deal?
New mortgage rules came in during 2014 that could mean you’ll struggle to obtain a good value mortgage in the current economic climate. Lenders must closely analyse your income and expenditure, and will undertake much more rigorous tests to ensure you can afford the new mortgage. If your circumstances have changed since you last got a mortgage, don’t presume you’ll get the same or similar deal as you did last time.
What am I trying to achieve?
There are numerous reasons people consider a remortgage, so be certain of your financial goals so you can effectively ensure they are being met. For example:
You want to pay off other debts: If you want to remortgage to release equity and pay off credit deals elsewhere, make sure your mortgage is the right vehicle for doing this. Once you’ve taken into account the fees and charges, a personal loan might be better.
Your deal is ending or poor value: This is a great reason to remortgage, but you need to be confident you’re getting a better deal from your lender. Do your sums, and don’t sign until you’re confident it’s worth it.
Your home has appreciated: If your home has gone up in value significantly, you could be in a new loan-to-value band, meaning you could be eligible for much lower rates of interest.
Other reasons include changing from an interest-only to a repayment mortgage, or to reduce the overall term on the agreement now you’re able to pay more. Whatever reason you’re remortgaging for, have your overarching financial goal in mind and assess any offer to ensure it’s ticking your box.
Is my credit file healthy?
It almost goes without saying that a good credit record is fairly essential to switching to a new mortgage. The more black marks or outstanding debts on your file, the fewer deals will be open to your application. Get a copy of your report before you start applying, and check everything on there is fair and accurate to avoid nasty surprises later on.
More on credit reports and how to improve your score here.
As a homeowner, it is your right and privilege to seek out a better deal for your mortgage. Many borrowers report saving thousands of pounds over the lifetime of their mortgage as a result of switching away from their original deal, so it could pay dividends to compare the market from time to time.
However, as with any loan, do make sure you can afford the repayments and that the overall deal makes good financial sense before you sign on the dotted line.
For more advice on remortgaging and help finding a great deal, contact me on 01252 759233 or email info@thesurreymortgagebroker.co.uk