Introduction

Remortgaging is the process of taking out a loan against a house you already own. However, you can remortgage your home with the same lender, officially called a product transfer, especially if they have the best price. In most circumstances, customers choose to switch lenders in order to take advantage of more competitive deals.

Although the procedure to remortgage your home is similar to that of your initial mortgage application, it is typically processed far more quickly. This is because the property checks have already been done. When you transfer lenders, however, these property checks may occasionally need to be performed again. This usually occurs when you have a unique or listed property.

Although a mortgage is not being raised, if you raise a mortgage on an unencumbered property, this is also referred to as a remortgage.

Why Remortgage Your Home?

There are many reasons why borrowers remortgage. Our circumstances vary over time, and a mortgage arrangement typically covers a significant portion of our lives. Therefore, your current mortgage contract might no longer be appropriate, given these changes and the state of the mortgage market as a whole.

The three most popular reasons why you may choose to remortgage your home are:

· Borrowing More

Sometimes the initial loan amount is no longer appropriate. Remortgaging is one option if, for instance, you want to add extensions, or redevelop. your home for example.

Remortgaging to take out a larger loan is typically achievable if you have enough equity in your home and meet the lender’s affordability requirements. Early in the mortgage term, it might be challenging to refinance for more money since you might not have enough equity to fund the increased borrowing.

· A Better Deal

Remortgages are often completed when one transaction expires. By refinancing, you can keep your current mortgage instead of having it reset to the lender’s standard variable rate.

Standard Variable Rates (SVRs) are often not competitive, making it desirable to refinance into a mortgage agreement with a lower interest rate.

If you remortgage your home, after a package expires, it ensures your mortgage is at the best rate possible for at least the next several years.

· Reduce / Extend your Mortgage Term

Our income varies as our lives go on. We typically earn more money between the ages of 40 and 55, therefore you might choose to shorten the duration of your mortgage and pay more each month during this time.

You can pay off your debt more quickly and, in most situations, lower the total cost of the loan by increasing your monthly mortgage payments since you are lowering the amount of time that interest accumulates.

Remortgage Your Home Early

Theoretically, you can remortgage your home as soon as your first mortgage application is finished, but this is usually not a good idea.

Mortgage lenders will typically lock you into the product term by assessing Early Repayment Charges if you decide to terminate the mortgage early. This is especially the case if it is a fixed-rate mortgage.

When you account for the cost of the charge, you might find that any financial advantage of re-mortgaging is lost. These Early Repayment Charges might be significant.

However, most lenders let you make extra payments towards your mortgage without incurring fees, and not all mortgages have early repayment penalties. This normally involves a 10% annual overpayment facility of the outstanding balance.

Remortgaging Early on a Fixed Rate

It is feasible to refinance early with a fixed rate, and doing so can be advantageous as long as the Early Repayment Charge does not offset the savings you achieve.

In rare circumstances, you might remortgage your home, rather than save money, because of a change in circumstances. In this case, paying the Early Repayment Charge is acceptable. For instance, after a separation or the withdrawal of a partner from a mortgage deed.

Anytime you are thinking about refinancing early, you should speak with a mortgage broker so they can assess your unique circumstances and offer advice.

For instance, some borrowers are taking the risk of refinancing early in order to lock in a more favourable rate than if they wait for their rates to increase over the course of the next 12 months.

When is the Right Time to Remortgage Your Home

If you are worried about your current mortgage interest rate or the possibility of a higher rate if you wait for your arrangement to expire, you should consider remortgaging.

Remortgaging may occasionally be necessary due to a change in circumstances, such as retirement or a career shift.

With your current mortgage agreement, you may be finding your financial condition challenging. Therefore, you might remortgage your home, to make your mortgage more affordable.

By extending the duration of your mortgage, for instance, you might be able to lower your monthly mortgage payments even with the current rate increases.

When your current mortgage contract is about to expire, it is nearly always advisable to remortgage your home in order to avoid paying your lender’s Standard Variable Rate.

What are the Risks?

Early remortgaging carries two significant dangers:

1. Remortgaging could be more expensive if you have Early Repayment Charges than if you let your mortgage contract expire and do it later.
2. Despite the gloomy economic prognosis at the moment, economies are known to change dramatically, especially when governments and central banks adopt aggressive measures. If you remortgage your home early, in the hopes of avoiding a higher rate, it may lead you to discover that the interest rates would have been better if you had let your mortgage contract run its course.

Getting the Best Remortgage Deal

It is always advisable to speak with a Whole of Market mortgage broker whether you plan to refinance early or towards the end of your mortgage arrangement.

Our mortgage brokers in Barry will be in a position to research the mortgage market for the greatest offer and provide tailored advice based on your unique circumstances. The hazards of remortgaging will also be discussed with you by a reputable mortgage broker.

In addition to offering fee-free mortgage advice, Harbour Mortgage Solutions (authorised and regulated by FCA) also focuses on your protection needs. We’d love to help you with your mortgage and protection queries, please get in touch.