Can I remortgage early?
With mortgage rates on the rise, you might be starting to wonder whether there is a way you can get on top of your mortgage repayments and keep future payments at a manageable level. And making the decision to exit your current deal and remortgage early may be one way to do this.
It’s not necessarily an easy choice to make, however. Yes, locking in a fixed rate now could guard against future interest rate rises, but what if there are repayment or early exit charges to pay? Would it still be the right thing to do?
In order to decide, you’ll need to look at the whole picture. And you’ll want to employ the support of experts to help you. But first, it’s useful to understand the process you’ll need to go through. So let’s look at how remortgaging works, along with the potential benefits and any pitfalls you might encounter.
So, how does the process of remortgaging work?
Remortgaging is moving your mortgage from the deal you are currently on to another one. This might be with the same lender or it could be with an entirely new one depending on the deals available to you.
Just like you might do with insurance quotes or energy providers, the process of remortgaging involves ‘shopping around’ to try to get the best deal. You’ll then be able to compare the options with your current deal to see which is likely to work out best for you over the longer term.
Just like when you applied for your mortgage originally, you will need to undergo some security and income checks. You will need to submit up-to-date income statements or pay slips and you may even need to submit to further credit checks. This is all a part of the due diligence carried out by banks and other lenders.
To get a quick idea of how much you might be able to borrow you can have a play with our mortgage calculator. This will give you an idea of what you might expect to pay per month so you can see if this is something you’d like to pursue.
Should I remortgage now?
Whether now is the right time for you to remortgage will depend on your own individual circumstances.
The Financial Conduct Authority put out a statement earlier this year suggesting it was a good time to consider the idea of remortgaging<link to Remortgaging blog 2 – Is now the best time to remortgage?> to lock in a fixed rate before interest rates rise further. But in order to find out whether this is true for you, it might be useful to talk to a qualified mortgage adviser.
What are the benefits of remortgaging my home?
Remortgaging is a normal part of home ownership. At the point your original mortgage deal ends it’s normal to remortgage to take advantage of favourable rates or to ‘fix’ your monthly payments so you have control of your outgoings.
But there are plenty of reasons you might remortgage before the end of your term – and they’re not all related to saving money!
If your financial situation changes during the term of your mortgage and you find you have additional money each month, or a large windfall to invest, you might decide you want to make overpayments in order to bring down the balance of your mortgage. If your mortgage deal does not allow for this it could make financial sense to move to one that does.
Alternatively, if you need to find a lump sum of money – to pay off debts or to fund renovations for example, you might find that remortgaging to a different product to release equity from your home is more favourable financially than taking out an additional loan.
Talk to a qualified mortgage adviser for advice to suit your individual circumstances.
Will there be an early repayment charge?
If you choose to remortgage early you’ll need to check your current loan agreement to see if there will be a charge. This might be in the form of an exit fee. Many lenders include this clause in loan agreements, at least for the initial term of the mortgage.
Just because there is a fee to pay though, doesn’t mean it won’t still make financial sense to go ahead with the remortgage. You will, however need to factor the amount of the repayment into your calculations.
Once you reach the period six months before the end of your agreement it’s common for this fee to be waived, making it cheaper and easier for you to move to a different product.
Can I remortgage early if I am on a fixed rate?
If you are on a fixed rate mortgage there is nothing stopping you remortgaging early, subject to any fees that might apply. Make sure you work out the costs you would expect to pay and factor these into your decision making.
Want to know more?
Remortgaging doesn’t need to be a difficult or complicated process. And there can be many benefits to doing so.
If you would like personalised advice to work out whether remortgaging could be the right option for you, get in touch today.
*You may have to pay an early repayment charge for your existing lender if you remortgage early.