Knowing when to remortgage or even whether you should at all, is a conundrum every homeowner faces at least once in their lifetime, yet the reason to do so can often seem unclear. The dreaded ‘R’ word has enveloped connotations of financial upheaval and unnecessary stress, as the process of refinancing sets to take over [what feels like] your life, until it’s complete.
As many high net worth clients know only too well, remortgaging on a high value basis can come with more fuss than simpler cases. Overturning your current financial plan can also feel drastic, especially if you’re comfortable with your current deal. So why bother at all?
Remortgaging, believe it or not, can be a smooth-running process. Especially if you seek the right advice. We understand the importance of finding the best deal to prepare you for the future and the unexpected changes that life so often throws.
Asides from simply finding a better alternative to your existing deal, there are many benefits of remortgaging that you may be yet to consider. We’ve put together our top 5 reasons to remortgage, so you can outline the best opportunities available to you…
- Raise funds or withdraw equity
Remortgaging is a cost-effective way of drawing out funds for additional major outgoings. Whether it’s to make home improvements, pay for a purchase, or if your children are heading to university or getting married, you can use equity to pay for important investments without having to borrow separately (and more expensively). Alternatively, if you’re receiving higher income or your property’s value has increased, you may be able to increase your mortgage to help fund alternative spending. Overall, remortgaging is generally cheaper (and more convenient) than moving home, allowing you to refurbish or extend your existing property using equity instead.
2. Consolidate debts
It’s easy to build up debt in some way, be it a car loan or credit cards – we’re all human after all! Remortgaging can relieve the financial pressure that outside debts bring, by similarly releasing some of the equity held in your home and turning it into cash to consolidate them. The ability to use equity in this way is hugely important, as debts such as these have the potential to attract much higher interest rates than your mortgage. Even still, you should always think carefully when securing other debts against your home, as it could cost you more in the long run or end up repossessed if you fail to keep up with repayments.
3. Transfer to more appropriate products
You may find at some point during your mortgage term that your property no longer fits the same criteria as when you took out the initial loan. For example, if your find your property value has gone up considerably since taking out your mortgage, you could be in a lower loan to value band, making you eligible for lower rates. Equally, if wanted to switch from interest only to a repayment mortgage (a useful solution for underperforming endowment mortgages), your lender should be willing to process the change. This might mean putting only a part of your loan on capital repayment and leaving the rest on an interest only term, avoiding a shortfall once the term ends. Whichever you prefer, remortgaging is the best way to switch onto a more beneficial deal dependent to your criteria, with little stress and much reward.
4. Your financial situation has changed
Many mortgage terms last for decades not years, so it goes without saying that your circumstances are likely to change during that time. Perhaps you’ve had a pay rise or have inherited some money, for example. You might now want to make an overpayment but are restricted by your current lender. A remortgage can help reduce your loan size and result in a cheaper rate. Or maybe you wish to borrow more? A different lender may enable you to raise money cost-effectively on a lower rate. Even if your current term is coming to an end, to avoid being stuck on a lender’s Standard Variable Rate (which is normally higher!), you are more than likely to find a better deal elsewhere, be it a long-term fixed offer or a shorter, discount mortgage.
5. Be better prepared for the future
Mortgage rates and lenders’ offers are constantly changing, causing many borrowers to miss out on some of the best deals available on the current market, simply because they’re stuck on a term. Obtaining a lower interest rate is essential for lowering monthly repayments, while a fixed rate can effectively act as insurance to economic changes; ensuring that market activity won’t affect your monthly outgoings. Additionally, if you’re currently paying your lender’s Standard Variable Rate (SVR), it’s more than likely that your existing lender could offer better rates and increased flexibility from a different product. If not? Now is the time to consider switching. Although this has the potential to trigger early repayment charges, the net saving you could receive is likely to outweigh them, allowing you to save on monthly repayments or even repay your mortgage sooner.
It may only feel like yesterday since you found your first mortgage, which is often a tricky process in itself. Even if you’ve been previously put off scouring the market, remortgages are increasingly popular with borrowers for the many opportunities they offer, as the right type of deal could save you thousands a year.
We believe strongly in keeping our clients as informed as possible and we hope you have found this useful. For more details, please do have a flick through our guide library, where you will find in-depth, market-leading whitepapers on the mortgage process and specific product-related information. If you have any questions about this article, or the remortgage process generally, please do get in touch below.