Remortgaging – what is it and what are the potential benefits?
What is a remortgage?
Re-mortgaging is the act of switching your existing mortgage to a new deal, either with your existing lender or a different provider. You’re not moving house and the new mortgage is still secured against the same property.
The days of having your mortgage with the same lender for the whole term are long gone. More and more people are discovering the savings to be had when they make the switch from their current mortgage provider to a new one. Currently around 2 million people in the U.K are on their lender’s standard variable rate. Standard variable rates differ from lender to lender but they are almost always more expensive than introductory deals offered for new customers. Typical standard variable rate products are around 4-5%, with current introductory fixed rates can be below 2% through to 3% which could mean a massive monthly saving in payments to the lender.
Reasons to remortgage?
- To reduce the interest rate on your mortgage
- To fix your monthly payments and protect against possible future rate rises
- Raising money to carry out home improvements
- Raising a cash lump sum by releasing equity from your home
- Consolidate debts
When are you able to remortgage?
You are able to secure a new product up to 6 months before your current deal comes to an end and potentially look to switch with your current lender up to 4 months before. With interest rates rising it now might be the time for you to look for a new deal.
Remortgaging/ Product switching – The differences
When you remortgage you move lenders, so as a new customer the new lender will check affordability in the same way as when you purchased the property originally, so if circumstances have changed e.g. one of you is no longer working or have reduced your hours, then remortgaging isn’t always possible. This DOES NOT mean you have to move onto the lenders standard variable rate… In most cases your existing lender will offer you a new deal when your current rate expires if you have maintained your account and not broken any of the conditions of the mortgage. This is what is known as a product switch or product transfer.
If you are currently coming to the end of your deal, or want to find out if its financially beneficial for you to switch early then please get in touch and one of our advisers can assess your requirements.