When do I need to remortgage?
Typically, you need to remortgage whenever you are approaching the end of your current fixed, capped, or discounted rate period. Once this period ends, you will automatically be switched to your lender’s standard variable rate (SVR), which will usually significantly increase your monthly repayments. Most lender’s SVR is set 2% higher than other deals on the market, forcing the average borrower to pay roughly £200 more per month (£2,400 more per year) once the fixed or discounted period expires. It is best to avoid this payment shock by planning ahead and getting cheap remortgage rates before you end up on the SVR.
However, you don’t have to be on a fixed, capped, or discounted rate mortgage in order to remortgage. You may find that interest rates are currently very low and you want to change your variable mortgage to a fixed mortgage.
Similarly, you might find that you want access to more money in order to fund activities such as home improvements. By releasing some of your equity and taking out a bigger mortgage, you will have extra money to spend on other purchases. This process consolidates your debts and only gives you one payment to worry about each month. Additionally, this can save you a lot of money since mortgages always have a better interest rate than personal loans. Just be careful when you calculate the cost of adding this money onto your mortgage payment. You will have a better interest rate, but you can end up spending a lot of money on interest if you have a long mortgage term. You also need to make sure you can comfortably make your monthly payments since this method of debt consolidation puts your home at risk if you fail to pay back your loan. [Read more…] about Remortgage Guide