How to align your mortgage terms with your current financial position

Is now the time to review and assess your eligibility and compare deals?

Although remortgaging your home can seem daunting, proper preparation and knowledge can often lead to significant financial benefits. While the process itself is similar to securing a mortgage when you first purchased your property, it’s crucial to understand how your circumstances and the housing market may have evolved over time.

Changes in your personal situation – whether it’s a new job, self-employment, or growing your family – can all influence the amount you can borrow. Additionally, if the value of your property has increased, you might find yourself borrowing a smaller percentage of the home’s value, which can unlock more favourable interest rates.

Renewing the mortgage process

To remortgage, you’ll essentially need to begin a brand-new mortgage application. The lender will reassess your property’s value, and once approved, you’ll be bound by the terms of the new mortgage product – including any tie-in periods or conditions. Because the process can be time-consuming, it’s wise to start planning at least 6 to 12 months in advance of your current deal expiring.

While many homeowners focus on securing the right new deal, it’s easy to overlook the costs associated with ending an existing mortgage. Most lenders charge an administration or “exit fee” for closing your account – a sum that can reach up to £300. Additionally, early repayment charges (ERCs) are an important consideration during the initial fixed, tracker, or discounted periods.

Understanding early repayment charges

ERCs are typically calculated as a percentage of the remaining mortgage balance and tend to reduce as the fixed period nears its end. For example, a five-year fixed deal might carry an ERC of 3% in the first year, decreasing to 0.5% in the fifth year.

Although ERCs can be a deterrent, it’s worth exploring whether refinancing early could save you money, particularly if interest rates are falling. Sometimes, the benefits of switching to a better deal outweigh the penalties. Seeking professional mortgage advice can help determine whether an early switch makes financial sense for your circumstances.

How your circumstances affect borrowing

Factors like employment status, salary, debt levels, and marital status can influence your ability to borrow when remortgaging. This means that you may not always be eligible for the same level of borrowing as your previous loan. On the other hand, you might be pleasantly surprised by the options available if your circumstances have improved.

If significant life changes have occurred since your last application, discussing your options with a mortgage broker is essential. Our mortgage team can guide you through the process and explain how these changes could affect the amount and type of mortgage you can secure.

Fixed-rate products and market competition

Most borrowers in the UK opt for fixed-rate mortgage products that offer preferential rates during the initial term. After this period, you’re often free to switch to a new mortgage product without penalties. Lenders frequently introduce competitive deals every three to four months, which could mean there’s a better product available to suit your financial goals.

If applicable, review your mortgage every two to five years, depending on your fixed rate term. Doing so ensures you remain informed about better options and avoid unnecessary costs when transitioning to your lender’s standard variable rate.

Loan-to-value and home maintenance

The loan-to-value (LTV) ratio plays a significant role in determining your mortgage interest rate. If your home’s value has increased since purchase, you may fall into a lower LTV bracket, improving your eligibility for more competitive deals.

To ensure your property is valued as highly as possible, it’s a good idea to present it in the best condition. Any required maintenance should be completed, and freshening up the décor can positively impact how a surveyor views your home’s market value.

Thinking of remortgaging your home?

Remortgaging allows you to align your mortgage terms with your current financial position, potentially leading to savings or a more manageable repayment plan. If you’re unsure where to begin, our expert mortgage team can set you on the right path. They will help assess your eligibility, compare deals, and guide you through the complexities of the process.