Time to switch your mortgage?

Your mortgage is likely to be one of your biggest monthly costs and making sure you’re on the best possible deal can make a huge difference to your overall finances. Remortgaging could save you thousands of pounds, without making any lifestyle sacrifices. Essentially, it’s nothing more complicated than switching to a different mortgage deal. Just as mortgaging means taking out a loan to buy a property (usually using that same property as collateral), remortgaging means finding a new loan, either with the same lender or another lender, but with different terms.

WHY DO PEOPLE REMORTGAGE?
Usually, people remortgage to find a mortgage deal with a lower interest rate, which could mean lower monthly repayments and less to pay in total. Often, they’ll be looking to replace an existing fixed rate or tracker rate mortgage that is coming to an end. This avoids switching to the lender’s standard variable rate at the end of the period, which is usually higher than the introductory rate. For most homeowners their biggest outgoing is their mortgage repayment, but by reducing your mortgage rate by even a small amount, you could save thousands of pounds per year, every year, until it’s all paid off. Mortgage payments could also be reduced by extending the term of an existing mortgage, for example, increasing a 25-year mortgage term to 30 years. However, this option will cost more in the long term due to accruing interest. On the other hand, remortgaging to a different lender may allow you to reduce your mortgage term and enable you to pay it off sooner so that you can be mortgage free. Some people also remortgage their property to release some of their built-up equity, which can be used as finance to consolidate other debts or fund expensive home improvements, for example. Another reason to remortgage is because, once a significant portion of the original mortgage loan is paid off, the homeowner could apply for a lower LTV (loan-to-value) mortgage, which may have lower rates. Some people may also want to switch from a variable rate mortgage to a fixed-rate mortgage so they know exactly how much they will be paying each month during times of financial uncertainty.

WHO CAN REMORTGAGE?
Whether or not you can remortgage depends on the terms of your current mortgage. Some lenders demand an exit fee or early repayment charge, which can amount to more than you’d save by switching. Also, if you’re switching lenders, you’ll need to pass the new lender’s affordability assessment. So, if your financial circumstances have changed (for example, your income is much lower than it was), you may not be able to remortgage with a new lender, although you could still potentially remortgage with your current lender. Remortgaging your home and the amount of time needed will depend on your individual circumstances and remortgage needs. Providing clear, accurate and relevant documents when needed, such as proof of earnings, can speed up the process.

HOW MUCH COULD YOU SAVE BY REMORTGAGING?
If you’re nearing the end of an introductory period on your current mortgage, you’ll be switching to the lender’s standard variable rate (SVR). This may still be nearly double what you might pay by switching. That difference in interest rates could cost you hundreds of pounds a month, or several thousand pounds a year, in repayments.

WHAT STOPS PEOPLE REMORTGAGING?
Some people worry that they won’t be accepted for a new mortgage deal because they’ve been furloughed or have been made redundant. Some feel uncertain about their financial future and want to wait until they feel more secure. Some think that there might be a lot of hassle involved in remortgaging. These are all valid concerns but not necessarily reasons to remain with your current mortgage. By obtaining professional mortgage advice you’ll get a better understanding about what mortgages are available to you, what rate you’re likely to be approved for and whether this is the right choice for you now, as well as saving you time shopping around for the best deals.