With inflation surging this year, and the Bank of England raising interest rates in response, many people are looking to keep their mortgage costs under control.
Remortgaging – moving your mortgage from one lender to another – offers the potential to save significant long-term costs, by switching to a better deal or fixing your repayment rate.
Here is why we believe you should consider remortgaging your property this year.
Is now a good time to remortgage?
Right now, both inflation and interest rates are on the rise, which means mortgage rates are set to get more expensive.
Inflation hit a 40-year record of 9.1% this June, and is expected to reach 11% this year. The Bank of England, meanwhile, has been incrementally raising interest, with the latest increase bringing the rate from 1% to 1.25% on 16 June.
The Office for Budget Responsibility has predicted interest will continue to rise in 2022, potentially reaching 3.5% if the UK experiences higher and longer-lasting inflation.
All of this means remortgaging, and locking in a lower rate before your costs go up any further, has the potential to save you thousands of pounds in the long run.
But demand is high right now, making it essential to act quickly.
Reasons to remortgage
There are a number of reasons remortgaging your home could be a significant benefit to you and your finances.
Chances are, you could save a lot of money on interest or fix a mortgage rate to protect you against the rising costs of living.
Getting a better rate
The mortgage market is always changing. By shopping around, you can often find a better deal than the one you have currently.
If you decide to switch your current mortgage provider, you will be charged a small rate as an exit fee, or maybe even an early repayment charge on your outstanding loan.
That said, this fee is minimal compared to the amount of money you could save by finding a better rate.
By studying the market, you can find competitive interest rates, even if you still have a large loan. The best thing to do is talk to a professional about the costs of remortgaging.
Your introductory rate is ending
When you first take out a mortgage, your rate will typically be set at a low level for an introductory period. After this offer has ended, your rate will usually change to the lender’s standard variable rate (SVR).
An SVR is unlikely to be the best deal on the market, so remortgaging to a lower rate is often a good way to save money on your repayments.
The time you have left on your lower rate will depend on the type of mortgage you take out.
Fixed rate mortgages can vary between 2-15 years while tracker and discount mortgages usually only have a term time of 2-5 years before they go back to the SVR..
To avoid this, start looking for cheaper deals around 16 weeks before your current deal expires.
Changing your mortgage type
Remortgaging also gives you the opportunity to change your mortgage type.
For instance, switching from a tracker mortgage to a fixed-rate one means you can guarantee a certain rate for a set period of time – a good option if you expect your rate to increase.
You might also want to look for something more flexible when it comes to the terms of your mortgage.
Some mortgages will give you a certain number of ‘payment holidays’ which can be useful if you face a temporary drop in income at any point.
You may have to pay extra for the flexibility of this kind of mortgage, but it can be a relief if your situation suddenly changes.
If you are on an interest-only mortgage, you may want to switch to a repayment mortgage – or vice versa, depending on your circumstances.
The value of your home has skyrocketed
If you had work carried out on your home like an extension or renovations, you have probably increased its value.
Depending on the area you live in, your house price may have increased due to it becoming a desirable living destination.
This means you may have a lower loan to value (LTV) ratio and be eligible for lower interest rates. If so, locking in a lower rate could save you a lot of money, so remortgaging is an attractive option.
The same also applies if you own more equity. The longer you pay into your mortgage, the more equity you have. This will also help you get a cheaper deal by remortgaging at a lower LTV ratio.
Borrowing more
If your current lender refuses to lend you more money, you might be able to find one that will. Remortgaging with a new lender could allow you to borrow more and get a cheaper rate.
This will depend on what you intend to use the money for. You are more likely to be accepted for this loan if you look to make home improvements or settle outstanding debt, rather than starting a business or something equally risky.
Roebuck can help
Understanding your options is incredibly important, and the experts at Roebuck Mortgages have all the information you need.
Whatever your reasons for considering remortgaging your home, our team is here to offer your sound advice and help you decide whether it is the right choice for you.