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Remortgage Advice
Remortgage Advice

Remortgaging

Gio Mandato and Julian Nicolls talk all about remortgaging.

What is remortgaging?

Put very simply, remortgaging is where you apply for a new mortgage, either with your current lender, circumstances permitting, or with a different lender. Generally speaking, those are the two options: stay with the same lender or go with a different one.

What remortgage options are available?

It could be arranging a new deal with your current lender or moving your mortgage to a new lender for a better deal. That can involve either just refinancing your existing mortgage, or it could involve borrowing more money.

Customers sometimes take remortgaging to mean borrowing more money. It could mean borrowing on a house with no mortgage at the moment, perhaps to pay for home improvements.

How soon can you look at remortgaging?

Anytime, really. You can look at a mortgage whenever you like, but it doesn’t necessarily mean we can do anything straight away. As a rule of thumb, six or seven months before the end of your fixed rate is normally a good time to look.

The majority of mortgage lenders make their offers valid for six months. That gives you the opportunity of locking in an interest rate before your current fixed rate or deal comes to an end. That can be beneficial because as we well know this year, interest rates have gone up and potentially will continue to rise.

So you can lock in a deal based on today’s rates for a mortgage that might not end until April 2023 for example (as we’re recording this in November 2022). At that point interest rates may be higher. So it protects you against future interest rate rises.

When is it a good time to remortgage?

There are a few times when it makes sense to remortgage. You might be on a variable rate and are concerned about rate rises or the cost of living going up. It can be helpful to review your finances and get yourself onto a better deal.

It can be good to go from a situation where you can’t predict your costs, because you’ve got a variable rate mortgage, to being able to predict your cost with a fixed rate mortgage. Fixed rates are available for two years, three, five or ten years… even beyond that. Some lenders will offer a fixed rate for the term of the mortgage. There’s a lot of choice out there.

There are lots of times when remortgaging is a good thing. As we touched on earlier, you may want to borrow more. You might be looking to improve your home, to pay off some unsecured debts, or even pay for holidays or a wedding.

Speak To an Expert​

Whether it’s your first time, moving home or just looking for a better rate we would love to hear from you.

When is remortgaging not a good idea?

If you’re tied into a fixed rate you will have an early repayment charge if you want to come out of your deal before the end date. If the early repayment charge is very high it may not be cost effective to come out of that fixed rate and go to a different lender.

Or, if the interest rate you’ve got is very low, it’s usually worth staying with your current lender.

It could be that you’re quite close to the end of the term on a repayment mortgage, where the proportion of the monthly payments you’re making are mostly capital. In that case there’s not much benefit in reducing the interest rate because you’re not paying much interest.

If you’ve had a change in your circumstances since you took the mortgage out – or maybe you’ve had debt problems – your acceptability to a new lender might be limited. There may be a lender that would help, but they might not be able to offer you as good a deal as staying with your existing provider.

These examples emphasise why it’s important to speak to a mortgage broker. We’ll find out if it’s something that makes sense for you. No mortgage advisor will encourage you to do something if it’s a bad move.

Why remortgage at the end of a fixed rate deal? What happens if I don’t do this?

At the end of your fixed rate deal, you’ll go on to the lender’s standard variable rate. That tends to be higher than your fixed rate, and usually higher than the Bank of England interest rate.

It means you’re likely going to be paying more than you would on a different product. It’s less true nowadays with interest rates having increased, but historically the standard variable rate was always higher than fixed rates and tracker rates.

How do I improve my chances of getting a good remortgage?

As we said before, you should typically start looking at this seven months out from when your mortgage rate is coming to end. Because mortgage offers are valid typically for six months, you can apply for a mortgage at that point and know that you’ve got that new rate reserved. So the important thing is to speak to a broker early to understand what’s available to you.

What fees are associated with a remortgage?

With remortgages there generally aren’t many fees involved. Obviously when you purchase a property, you have to pay solicitors fees, potentially stamp duty and valuation fees. But when you come to remortgaging, generally most lenders will give you a basic valuation free of charge, and a free legal service. They might provide you with cash back instead, so you can choose your own solicitor to do the work for you. So generally speaking, costs are very low.

How can a mortgage broker help with a remortgage?

At the moment we’re having quite a few conversations with clients who are worried about their mortgage and their finances. We’re here to give people reassurance.

A client might be tied into a fixed rate but is worried that rates are going up. They want to know if they should come out of their fixed rate and do something different now rather than find in two or three years things are worse.

What we always do is keep in regular contact with clients. So if it doesn’t make sense to do something right now, we will help you when the time comes. If people do have a change of circumstances it might make sense to remortgage now, but it all depends on the individual.

Any mortgage advisor will be happy to have those initial conversations with you to work out what’s right. Is it the best time now or is it a case of wait and see? These discussions are very important.

What’s your view on the mortgage market today?

It’s very apparent from everything in the news that we are in for a bit of a rough ride. Those of us who have parents in their late 50s and early 60s will have heard them say how low interest rates have been. When they first bought their houses in 1980 the interest rate was 13% and inflation was 18%. Interest rates were changing on a monthly basis.

We’ve probably all had these conversations with older family members or friends. But nowadays, with house prices being much higher, mortgage debt being much higher, current interest rates are the equivalent of a 25% interest rate back in 1980.

We’ve certainly been living the dream with interest rates in the past few years, but these things are all cyclical. We’re back in a scenario where the cost of living has increased as well as our mortgage payments. It is going to be difficult for a while – the Bank of England has said it expects to get inflation under control in two years’ time.

So the feeling is that hopefully there are just two more years to get through, so we just need to hold on. We will get through this and back to what we remember.

You may have to pay an early repayment charge to your existing lender if you remortgage.

Think carefully before securing other debts against your home.

Your home may be repossessed if you do not keep up with your mortgage repayments.