Getting your first mortgage is exciting but did you know you’re not locked into it for the full 10, 20 or 25 years you’ve agreed to?
Reviewing your mortgage on a regular basis could save you thousands of pounds over the duration of your loan. Even better, these savings could help you shorten the term length and get you mortgage-free sooner than you expected.
Here’s everything you need to know about reviewing your mortgage.
What is a mortgage review?
Also known as remortgaging, a mortgage review is when you consider whether you’re still on the most suitable mortgage deal possible for your circumstances.
As your personal circumstances change, the economy fluctuates, and different deals arise, you could be paying more than you need to on your mortgage. So, reviewing your mortgage is a good way to make sure your current deal is still the right fit for you, or whether you could save money by finding a new deal.
When you should wait to review your mortgage
Before you jump into a mortgage review, it’s best to weigh up the pros and cons first.
If you’re still in the fixed term deal of your current mortgage, it’s usually better to wait. Leaving during the fixed term deal will incur hefty fees, negating the point of getting a better deal.
You may also want to wait to remortgage if your circumstances have recently changed. For example, if you have recently changed jobs for a lower salary, or have had a child since your last mortgage was approved, this may affect your eligibility for a new deal. If you’ve had credit problems that’ll affect your chances of getting a new mortgage.
If you don’t yet have much equity in your property, for example say only 10%, remortgaging may not be the right option for you. High loan-to-value rates of 90% or even 95% come with much higher fees, so staying on your existing deal could be better for you right now.
If you want to move house in the next few years, remortgaging may be an expensive option right now. Consider waiting until you’re ready to move to avoid being stuck in another fixed-term period that could add costs to your moving plans.
Finally, if you’re in the final few years of your mortgage term, remortgaging is often more expensive, due to fees, than sticking out the rest of your existing loan terms.
When reviewing your mortgage is a good idea
If you’re not in a fixed-term period, you have plenty of equity in your property, and your financial circumstances are the same (or improved) since your last mortgage application, it’s time to consider reviewing your mortgage.
When you’re out of the fixed-term period, early repayment charges are often much lower (although still costly so make sure you factor this into any potential savings).
In addition, when interest rates are low it’s a good time to shop around for a new deal, particularly if you found your current deal when rates were higher. You could save thousands of pounds in interest.
If you’ve had a significant boost in your household income, and could afford larger monthly repayments, a new mortgage deal could suit you. You may be able to renegotiate with your current provider, but early repayment charges may affect your savings. Remortgaging lets you find a deal where you can pay a larger amount off each month, saving thousands in interest and reducing the term of your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
How to review your mortgage in three steps
Remortgaging isn’t a quick and easy decision. You’ll need to consider your options carefully before you apply.
Think of everything you had to do when you first got your mortgage. Remortgaging means doing the same, including facing the same stringent credit and affordability checks. If you think you might not meet requirements, it may be best to sit tight until your circumstances improve.
However, if you’re in a good place financially and you want to save on your interest costs, follow these three steps to remortgage your property:
1. Assess your current deal
Is your current deal affordable? Do you have plenty of cash spare at the end of the month? Is the interest rate comparable with ones available now or is it much higher?
Reviewing your mortgage is all about making sure you’re on the right deal for you. Sometimes, hopping between mortgage deals to nab great interest rates may seem ideal in the short-term but can add a lot of time or fees to your long-term costs.
Think about your current deal and whether you want to make larger monthly payments, change your term length or reduce your interest costs.
2. Look at your circumstances and future plans
Are you due a promotion? Do you want to add to your family in the near future? Are you planning on relocating any time soon?
If you’re settled and financially secure, remortgaging can save tens of thousands of pounds. However, you need to consider your future plans too. For instance, if your situation is likely to change in the next year or two, changing your mortgage now could turn into a costly venture.
If you’re in your dream home (or a home you know you’ll be living in for at least a few more years), and your household income seems set to stay the same or grow, remortgaging could be right for you.
3. Speak to your mortgage adviser
Your mortgage adviser isn’t only there to help you get your first mortgage. They’re available to help you find the right deal at all times. That includes remortgaging, whether you want to stay in your current home or relocate or upgrade to a larger property.
An adviser has access to a huge range of mortgage deals, including those not available if you went direct to lenders. They’ll use their expertise to deliver impartial advice about whether remortgaging is the right course of action for you right now.
Remortgaging sums making your head hurt?
Balancing your options gets confusing when it comes to reviewing your mortgage. In such a turbulent economic climate, it’s also hard to know whether shifting to a fixed deal right now will mean you miss out on even better rates in a year’s time.
Call your local Middlesbrough mortgage expert on 01642 386319 or fill in our contact form to find out whether now’s the time for you to review your mortgage.
Find out more about our Mortgage Advice service in Middlesbrough