Practically every penny of Mike’s monthly salary is accounted for so, as the cost-of-living crisis starts to bite, he’s worried about making ends meet. He’s started shopping around for cheaper deals on his broadband, mobile-phone contract, and car insurance, and he’s also cancelled his gym membership and a couple of his TV subscriptions. But he’s overlooked the bill offering the largest potential saving – his mortgage.
What is remortgaging?
Remortgaging involves taking out a new mortgage on a property you’ve already bought. You might do this to replace an existing mortgage deal or to borrow money against your home.
Is remortgaging right for Mike?
After Mike’s last mortgage came to an end, he didn’t look for a new deal so he was switched onto his lender’s standard variable rate (SVR). An SVR is usually much higher than fixed and tracker rates, and it can go up at any time. Research by Habito found 27% of mortgage holders in the UK are currently on their lender’s SVR, and they worked out – on an average mortgage – this translates to an extra £340 a month. This means Mike could almost certainly benefit from remortgaging.
Other reasons to remortgage
Even if you’re not on your lender’s SVR, there are a variety of reasons you might want to remortgage:
- To beat interest rate hikes. As inflation goes up, interest rates are starting to follow suit, so it may make sense to lock into a low rate now.
- You’re coming to the end of a deal. Mortgage advisers generally agree you should start looking for a new deal around three to six months before your current rate ends. However, the research by Habito found 46% of mortgage holders are unaware of this.
- The value of your home has gone up. A significant rise in the value of your home may have moved you into a lower loan-to-value band, meaning remortgaging may give you access to reduced rates.
- You want to borrow against your home. Remortgaging may allow you to raise money cheaply on low rates. Before doing this, it’s worth getting financial advice to make sure this really is the cheapest way for you to borrow.
- You want to overpay, and you can’t on your current deal. If you’ve come into some money recently, remortgaging will allow you to reduce the size of your loan and possibly get a better rate. You’ll need to take into account any exit fees or early repayment charges to weigh up whether remortgaging makes financial sense.
Where to start
It’s not always clear cut whether you’ll benefit from remortgaging. A qualified mortgage adviser will look at your circumstances and find out exactly what you want to achieve by remortgaging. For example, are you simply looking to reduce your monthly payments or do you want a more flexible mortgage that allows payment holidays? The adviser will then set out the best options available. Regular mortgage reviews can help ensure you’re never overpaying unnecessarily.
If you’d like to speak to someone about your mortgage, we’re here to help.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.