If you’re a homeowner of working age, there’s a fair chance that you’re still paying off your mortgage and when your deal comes to an end, you will probably have to think about remortgaging – i.e. arrange a new mortgage deal.
If you stay with your current bank without negotiating a new deal, in all likelihood you will be put on their standard variable rate (SVR). That means there’s a good chance you will be paying a significantly higher rate of interest than the one you’re currently enjoying and in 2021, that could mean an interest rate of 3.5% or more.
Of course, you can negotiate a new deal with your current lender, which is referred to as a ‘product transfer’. However, many homeowners prefer to test the market and see if there is a better deal out there with a new provider.
Market watchers are of the opinion that there’s never been a better time to remortgage! As lenders seek to tempt homeowners, especially those with equity of 40 percent or more, with interest rates of less than 1% (though these may come with an upfront fee).
According to an article in The Times: “The fall in rates offers huge savings. A borrower who took out a five-year loan in 2016 would have paid 2.46% on average, assuming they had 40 percent equity, but would now pay 1.81%. It would mean a monthly saving of £64 on a £200,000 loan.”
The key to finding a decent remortgage deal is understanding the timetable, which starts with the application and then takes in the lender’s survey (to calculate your property’s worth), before it’s formally agreed.
Remember: you should only apply for a new deal six months before your current one expires – otherwise your current lender could hit you with a hefty ‘early redemption charge’:- usually between 1% and 5% of your total mortgage. This may wipe out any savings you would make by switching before the term closes.
A second reason homeowners remortgage is to borrow money against the value of their property, say for home improvements. For example, if your home has significantly increased in value since you bought it you could release some of the equity by remortgaging to pay for improvement work.
Your new mortgage payments would reflect how much you have borrowed, but if you have secured a deal with a low-interest rate then your mortgage payments may not be significantly higher than what you pay now.
The key to securing the best remortgage deal is to use an independent mortgage broker like Charles Cameron & Associates. We’ll guide you through the process and make you aware of any charges you may otherwise miss. In addition, because we’re not aligned with any one lender, hence the ‘independent’ tag, we only have your best interests at heart.