Remortgaging means moving your current mortgage deal to a new lender or taking out a new product with your current lender. If you remortgage, interest rates can be appealing as lenders will be eager to entice you. We reveal some key reasons to consider it…
1. Your current deal is about to end
If you’ve been on a competitive fixed-rate mortgage deal your lender will put you on its Standard Variable Rate when the deal ends. This rate is likely to be higher than your current rate, costing you more each month.
2. You want to save money even though your deal isn’t ending soon
This is a very good reason to consider remortgaging. However, it’s important to be aware of the costs. If your current deal isn’t about to end, you may have to pay an early repayment charge. In addition, there may be a small exit fee, also known as an admin fee, deeds release fee or account closing fee. However, incurring these costs could be worthwhile if you are able to secure an attractive deal on a new mortgage. It’s worth finding out what your early repayment charge is likely to be so that you can decide if it’s worthwhile. Look at the costs versus the savings carefully to see if it’s going to benefit you financially.
3. You want to make a large overpayment
Maybe you’ve inherited some money or had a bonus from work. Making a significant overpayment might see your loan-to-value reduce (i.e. what you owe in relation to your property’s value) and therefore get you a better rate. If you remortgage, you may be able to get a cheaper mortgage rate and may find a more flexible deal.
4. You want to borrow more
You may wish to carry out home improvements or build an extension onto your property. Remortgaging could be a cheap borrowing solution compared to other types of loans.
5. The value of your property has significantly increased
If your home has risen significantly in value since you took out your existing mortgage, you may be eligible for a lower interest rate as you could be in a lower loan-to-value category.
6. You’re going solo
Remortgaging might be an option if you’ve recently separated from your partner and want to stay in your current property. If you have a joint mortgage, you may choose to buy out your partner’s half of the mortgage if you can afford it. Then you could remortgage, but you would need to prove to the lender that you can afford the payments on your own.
If you wish to remortgage, you will need to provide proof of income. If you’re employed this could be recent payslips and the latest P60. If you’re self-employed, the documentation will depend on your trading style, but your adviser will be able to guide you accordingly. You will also need to provide three months’ worth of bank statements.
The process of remortgaging can normally take up to four weeks but applications are currently taking a bit longer so it’s best to allow plenty of time.