As a nation, we are becoming savvy at shopping around, yet many people still sit on a variable mortgage for years after their initial deal has finished.
So, how do you know if it’s worth remortgaging and what should you be looking out for? Here are our Senior Mortgage & Protection Adviser Daniel’s top tips:
1. Know when your deal ends
Most mortgage deals, last between 2-5 years, although some can run for 10 years. After this time, you will automatically be put on the standard variable rate (SVR) and in most cases this will be higher than your deal rate. Put a reminder in your calendar around 4 months prior to the end of your current mortgage deal to start shopping around.
2. Lowest isn’t necessarily the cheapest
Depending on the size of your mortgage, a low rate with a large arrangement fee could potentially cost you hundreds, if not thousands of pounds more over the initial rate period.
A slightly higher rate with a low or no fee could potentially have a bigger impact on your mortgage balance, costing you less over the same period.
3.Reduce your term
Rates have reduced over the past few years, so you could try using some of your savings to reduce the term rather than just reduce your monthly payment. You could potentially save thousands by taking 2 or 3 years off your term.
4.Look for the ‘add on’ months
Check your term when applying. Most products have a few months extra e.g. 2 year fixed rate could be 26 months. You need to be careful not to round up the term or you could find yourself adding 2 or 3 months every remortgage and extending the term by a couple of years over the duration of your mortgage.
5.Small mortgage
If you have a small amount of remaining mortgage debt or a short remaining term, such as 5 years or under, Remortgaging may not be worth it due to the related fees (such as product fee). Also, many lenders will not take on a mortgage under £25k.
6.Change in circumstances
It may be that your current deal is right for you and your circumstances, therefore it may not be worth moving at present. However, it may be that as your circumstances change, your mortgage requirements need reviewing. It’s always worth taking the time to shop around, so put a note in your diary to review your mortgage deal regularly.
7. Redemption penalty
If you pulled out of your current mortgage deal before the term is up, it could well come with an early repayment charge However, in some cases the new mortgage deal could result in savings higher than the redemption fee, so it might be worth doing the sums.
8. How much is your property worth?
Your property may have increased in value since you last reviewed your mortgage. An increased loan to value (LTV) could mean you are eligible for other mortgage rates and deals. On the other hand, your property may have decreased in value, so your equity may be lower making it harder to secure a loan.
9. Speak to an adviser
We can search over 11,000 mortgages from 90 different lenders to find the right deal to suit you and your circumstances.
Got a question about remortgaging? Speak to a specialist adviser on 0800 652 6649 or email [email protected]
You may have to pay an early repayment charge to your existing lender if you remortgage
Your home may be repossessed if you do not keep up repayments on your mortgage.
There will be a fee for mortgage advice. This actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.