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.
How much does it cost to remortgage?
On average, it costs £1,100 every time you remortgage. Therefore, if you remortgage every 2 years over a 25 year mortgage term, you’re looking at spending roughly £13,596 on remortgages.
Why does it cost this much to remortgage?
When you remortgage you need to pay several mortgage fees. The fees to look out for include early repayment charges (ERCs), valuation fees, legal costs, arrangement fees, and exit fees.
Early repayment charges are the main expenses to look out for when you remortgage. You have to pay ERCs whenever you want to change your mortgage before you’ve reached the end of the agreed mortgage term. Typically these fees come into play when you are on a discount mortgage, fixed rate mortgage, tracker mortgage, or capped rate mortgage. These fees can cost hundreds to thousands of pounds, so look carefully at your current mortgage details before you agree to switch mortgages. Your lender may waive some of these fees, so make sure to check and see if you can avoid these costs.
Is remortgaging worth the cost?
This completely depends on your current mortgage and the new mortgage you want. When you start thinking about remortgaging, pull out your mortgage details and calculate your current monthly repayments. Then look at the remortgage deal and calculate the monthly repayments for this mortgage. Finally, add up any fees involved in switching mortgages and add them to the new mortgage calculation. If the new mortgage is still cheaper than your current mortgage, then it’s time to remortgage.
Basically, you need to weigh the cost of remortgaging with the potential money you could save by switching mortgages.
If you are about to be put on your lender’s standard variable rate (SVR), then it is almost always worthwhile to remortgage since SVR rates are usually notably higher than other deals. Over one third of all mortgages today are remortgages, which proves that remortgaging is very common and worthwhile.
Calculating the advantages and disadvantages of remortgaging can be fairly complicated, especially when you look at all the fees involved. Therefore, it is very important to get remortgage advice by talking to a professional mortgage adviser who can talk you through the right course of action to take when you are considering changing your mortgage. Not only can an adviser thoroughly weigh the pros and cons of remortgaging for your individual case, they can also access thousands of deals at once to compare remortgages quickly and find the best deal available.
Should I stay with my current lender or look elsewhere when I remortgage?
You should always shop around when you are looking for remortgage deals. If you find a deal that is better than your current lender’s deal, contact your current lender and let them know you are thinking of switching to this better deal. Lenders always want to keep their customers, so they may offer you some form of loyalty bonus.
If you stay with your current lender, the process is slightly easier since you simply need to fill out a form. If you change lenders you need to submit an application, which could cost time and money. Think about how happy you are with your current lender. If they have treated you as a valued customer, you may feel content keeping their business. But if you feel slightly uneasy about the way your lender has conducted any of your business, switch lenders: there are plenty of good choices out there.
You also need to calculate the deals different lenders offer you. Keep a sharp eye on fees, as these can drastically affect how much money you spend over the course of your mortgage. One lender may save you money now, but their fees may cost you a lot more in the long run.
Should I get the same type of mortgage again?
Just because your current mortgage has worked well for you, don’t assume that it’s the best type of mortgage to take out again. Look at mortgage rates and calculate monthly repayments to see if a different type of mortgage makes more sense at this stage in your life.
Think forward five years and try to plan ahead. Will you be getting married? Will you start a family? Do you think you’ll need to pay for other large expenses? Do you expect a salary change? All of these events will affect your mortgage. You may find you want a fixed rate remortgage, variable rate remortgage, or even a bad credit remortgage. Try to think of the future and look for the mortgage that best suits the lifestyle you plan to have for the next five years.
Generally, if you have a small mortgage you might want to look at remortgages with a higher rate and lower fees since you will finish your mortgage soon. If you have a big mortgage you should look at remortgages with a lower rate and higher fees since you want to minimise your interest repayments.
How long does it take to remortgage?
Thanks to technology, the process of remortgaging is faster than ever. Almost all lenders have their product details and applications online. Mortgage advisers have incredibly fast computer programs that can search through thousands of mortgage deals. Therefore, remortgages are getting easier to arrange every year.
Typically, you need to start planning 6-8 weeks before your current mortgage period ends (or other date when you want your mortgage to change). This gives you time to research the other deals available, discuss fees and loyalty bonuses with your current lender, and switch over to your new mortgage.