Introduction
If you’re a homeowner in the UK, chances are you’ve heard the term re-mortgaging tossed around. But what exactly does it mean? More importantly, when is the right time to re-mortgage, and why should you consider it?
Whether you’re looking to reduce your monthly payments, release equity, or switch to a better deal, re-mortgaging can be a powerful financial tool — if used wisely. In this comprehensive guide, we’ll explore everything you need to know about re-mortgaging, including its benefits, timing, and the step-by-step process to make it work in your favour.
What is re-mortgaging?
In simple terms, re-mortgaging is the process of switching your existing mortgage to a new deal, either with your current lender or a different one. It usually involves paying off your current mortgage with a new one, often to secure better terms or access additional funds.
Think of it as refinancing but with the goal of improving your financial situation or achieving specific homeownership objectives.
Why consider re-mortgaging?
There are many compelling reasons to re-mortgage, which can be broadly categorised into cost savings, access to cash, and financial flexibility.
1. To Reduce Your Monthly Payments
Interest rates fluctuate over time. If rates have dropped since you took out your mortgage, re-mortgaging can allow you to switch to a lower rate, decreasing your monthly payments and saving you money.
2. To Lock in a Fixed Rate
If you’re currently on a variable or tracker mortgage, re-mortgaging to a fixed-rate deal can provide stability, protecting you from future rate hikes. This is especially valuable if you prefer predictable monthly expenses.
3. To Release Equity
Many homeowners re-mortgage to access the equity built up in their property — perhaps to fund home improvements, pay off other debts, or cover significant expenses like education or a wedding.
4. To Consolidate Debt
Re-mortgaging can be used to consolidate higher-interest debts (like credit cards or personal loans) into your mortgage, often at a lower interest rate, simplifying your finances.
5. To Switch to a Better Deal
Over time, your initial mortgage deal may become less competitive. Re-mortgaging allows you to find a more favourable deal, saving money over the long term.
6. To Avoid or Minimise Early Repayment Charges
Sometimes, breaking your existing mortgage early can incur penalties. Re-0mortgaging before your fixed or discounted rate expires might be a strategic move to avoid or minimise these charges.
When is the right time to consider re-mortgaging?
1. When Your Fixed or Discount Rate Ends
Most mortgages in the UK come with fixed or discounted introductory rates for a set period (usually 2-5 years). As this period nears its end, it’s an ideal time to consider re-mortgaging to secure a new deal.
2. When Interest Rates Drop
If market interest rates fall significantly, re-mortgaging can help you benefit from lower rates, reducing your monthly payments and overall interest costs.
3. When Your Financial Situation Changes
Experiencing an improvement in your income, or a change in your credit score, can make you eligible for better deals. Conversely, if your circumstances worsen, you might need to re-mortgage to manage affordability.
4. When You Need Additional Funds
If you want to release equity for home improvements or other purposes, re-mortgaging at the right time can help you access funds on favourable terms.
5. When Your Current Deal Is About to Expire
Don’t wait until your fixed-rate deal ends to start exploring options. Contact your broker early to avoid being rolled onto a standard variable rate (SVR), which is often the most expensive.
The Re-mortgage process : Step by Step
Understanding the process can demystify re-mortgaging and help you approach it with confidence.
Step 1: Assess Your Financial Goals
Ask yourself:
– Do I want to lower my monthly payments?
– Am I looking to release equity?
– Do I want to switch to a fixed rate?
– Am I consolidating debt?
Clear goals will guide your decision-making.
Step 2: Review Your Current Mortgage Terms
Check your existing mortgage agreement for:
– Fixed or variable rate expiry date
– Early repayment charges (ERCs)
– Remaining balance and term
– Any other penalties or fees
Step 3: Shop Around and Get Advice
Consult a mortgage broker (like Evermore Mortgage Brokers!) to explore the market. They can:
– Compare deals across multiple lenders
– Advise on the best products for your circumstances
– Help you navigate fees and potential penalties
Step 4: Obtain a Mortgage Valuation
Lenders will require a valuation of your property to confirm its worth and ensure the loan-to-value ratio (LTV) supports your application. If you want to know before the process start’s why not ask some local Estate Agents like Milburys, Lisa Costa or Rachel Gardiner?
Step 5: Submit Your Application
Provide necessary documentation:
– Proof of income (pay slips, tax returns)
– Bank statements
– Identification
– Details of your current mortgage
Your broker will handle much of this for you.
Step 6: Offer and Acceptance
Once approved, you’ll receive a mortgage offer. Review it carefully, considering interest rates, fees, and terms.
Step 7: Completion
After acceptance, the lender will arrange to pay off your existing mortgage, and you will start your new mortgage deal. The process typically takes a few weeks.
Potential Costs and fee’s
While re-mortgaging offers benefits, it’s important to be aware of potential costs:
– Arrangement or booking fee: charged by lenders for setting up the new deal.
– Legal fees: solicitor or conveyancer costs for transferring the mortgage.
– Valuation fee: cost of property valuation.
– Early repayment charges (ERCs): penalties for ending a fixed or discounted rate early.
– Broker fees: if your broker charges a fee (sometimes covered by the lender).
Always weigh these costs against the potential savings or benefits.
Common Myths about Re-mortgaging
Myth 1: Re-mortgaging is complicated and stressful.
Reality: With professional advice and guidance, it’s straightforward and can be managed efficiently.
Myth 2: It’s only worth re-mortgaging if interest rates drop significantly.
Reality: Even small reductions in rate can lead to savings, and other reasons like debt consolidation or releasing equity are valid too.
Myth 3: Re-mortgaging always incurs penalties.
Reality: Not necessarily — it depends on your current deal, but early repayment charges can often be mitigated with careful planning.
Is Re-mortgaging right for you?
Re-mortgaging can be a smart move if you want to:
– Reduce your monthly payments
– Lock in a fixed rate for peace of mind
– Access funds for home improvements or other needs
– Switch to a better deal or lower interest rates
However, it’s essential to assess your personal circumstances, costs involved, and market conditions. Consulting a professional mortgage broker can help you make informed decisions tailored to your goals.
Need Expert Advice?
At Evermore Mortgage Brokers, we specialise in helping homeowners in the UK make the most of their mortgage options. Whether you’re approaching the end of your fixed term or simply exploring your options, our experienced team is here to guide you every step of the way.
Contact us today for a free consultation and discover how re-mortgaging can benefit you!
Remember: The right timing and knowledge can save you thousands of pounds and provide you with greater financial flexibility. Don’t wait until it’s too late — start exploring your re-mortgaging options today!
This article is for informational purposes only and does not constitute financial advice. Please consult a qualified mortgage advisor for personalised guidance.
