How Remortgage Can Save You Money
Did you know remortgage can save you thousands of pounds?
If you’re a first-time home buyer, you may be under the misconception that, after moving into your flat or house and locking in a mortgage rate, all the work is over with. This may not be the case. If you want to save some money in the long run, it may be worth talking to your financial advisor at some point to see whether remortgage could be a suitable option for you. Don’t worry though, remortgaging is nowhere near as stressful as the process of actually purchasing a home! In fact, you are probably going to feel a lot less stressed when you’ve got a few extra hundred pounds floating around your bank account each month. Imagine what you can do with that!
What exactly is remortgage?
A remortgage is where you take out a new mortgage on a property you already own - either to replace your existing mortgage or to borrow money against your property. It’s important to understand that a remortgage is an entirely new mortgage that you take out. The old mortgage is cancelled, and a new one is activated. You don’t take out a ‘remortgage’, but rather a new mortgage.
Sarah currently has a mortgage with ABC Bank. She pays £850. With XYC Bank, however, she could pay just £700. Sarah’s mortgage deal with ABC Bank is set to end in two months time. As such, she decides to contact GWlegal to get the wheels moving - when her current mortgage comes to an end, she will cancel her mortgage deal with ABC bank immediately and move the loan to a different lender (in this case, XYC Bank) to secure a better deal and save money. With the extra £150 in her bank account each month, Sarah plans to save up to pay for some much-needed home improvements (and maybe even take that mini holiday she’s been dreaming of!).
Reasons to remortgage
The most common reason home-owners decide to remortgage is, like Sarah, they want to save money and lock in a cheaper mortgage rate. The money saved will often go towards the home itself, such as renovations, purchasing new furniture, and so forth.
- They desire a more flexible deal e.g. your current loan might not allow any overpayments, underpayments or payment holidays etc and you feel this kind of flexibility will be useful.
- To lock-in a different style of mortgage such as a fixed interest rate as opposed to a variable rate. With a fixed interest rate, you won’t be impacted if interest rates rise.
- The home-owner wishes to pay off the mortgage sooner. With better mortgage terms and conditions, this may be possible. If you were a first-time buyer, it’s likely that when you took out your initial mortgage your circumstances were less stable (e.g. you were self-employed or had a damaged credit file) and so you had to take out a less desirable mortgage (e.g. with a high-interest rate or low LTV). Now that your circumstances have improved, you can remortgage for a far better deal.
Advantages of remortgage
As already mentioned, there are a number of pros when it comes to remortgage, including:
- Saving money each month
- Locking in better or more flexible terms
- You may be able to extend the length of the mortgage
- If your property has increased in value, you may be able to withdraw some built-up equity
- You may be able to pay off your mortgage sooner
- It may help you to consolidate existing debts (although remortgage should be considered as a last resort in this regard)
Disadvantages of remortgage
The cons of remortgage include:
- There will be some initial fees and charges to pay, including fees for getting out of the present deal and fees for getting into the new one, in addition to any legal fees. However, do keep in mind that, in the long run, you will most likely recoup that money. For example, if remortgage costs are £1,000 but you save £100 a month (fixed for 2 years) that's still an overall 'profit' of £1,400.
- It’s usually not advised to remortgage if you are locked into a current mortgage period, as the fees you will have to pay will likely be enormous. You may have to wait some time (months or years, depending on your circumstances) before you can remortgage.
When can I remortgage?
Most property owners will remortgage in the first three to six years of obtaining their initial mortgage. It may be possible to remortgage your present deal after a longer period of time, but you’ll need to seek professional advice.
As mentioned, the best time to remortgage is when your current mortgage period is about to come to an end. You need not wait until that exact date though. It’s possible to get things moving in advance. Speak to us about it!
When is the best time to remortgage?
The best time to remortgage would be when the interest rate is lowered. We would advise you to keep a keen eye on the news for any announcements made by the Government!
Should I stay with my current mortgage lender or switch to a new one?
The question of whether you should switch lenders depends on your circumstances, the deals that are being offered in that period, and more. A professional mortgage broker will be able to help you answer that question.
There is something to be said for sticking with a financial institution however, as loyalty is often rewarded. Banks and lenders are likely to want to keep your business. If you’re thinking of remortgaging and spot a good deal being offered by a different lender, ask your current financial institution to match it. The worst that can happen is they say no! If that happens, simply take your business elsewhere. In today’s competitive market, finding a new lender is never a big problem.
I still need help!
GWlegal has decades of experience helping people remortgage and a friendly member of our property team would be delighted to help.
Who are GWlegal?
If you have a legal matter you wish to discuss don’t hesitate to get in touch. You can call us on 0345 373 3737 email us firstname.lastname@example.org with your question.
Who are GWlegal? We’re a national firm with local values.
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Content correct at time of publication.