Remortgaging means switching your current mortgage to a new lender or product, usually to save money or change the terms of your mortgage. Knowing the right time to remortgage can be crucial in securing the best possible deal. In this article, we will explore the factors influencing when you can remortgage, as well as some key considerations to keep in mind.
When Can You Remortgage?
End of your initial mortgage term
The ideal time to remortgage is usually at the end of your initial mortgage term, which is typically between 2 to 5 years. At this point, you will move from your initial mortgage rate to your lender’s Standard Variable Rate (SVR). The SVR is often higher than your initial rate, meaning your monthly payments may increase. Remortgaging to a new deal at the end of your term can help you secure a lower interest rate and potentially save on monthly payments.
Equity in your property
Equity is the difference between how much your home is worth and how much you still owe on your mortgage. To get a remortgage, you usually need to have at least 5% equity in your home. However, having 10% or more equity will provide you with more competitive deals. You can build equity by paying down your mortgage or through an increase in your property’s value.
Changes in personal circumstances
Life events such as a job change, salary increase, or inheritance can affect your financial situation. If you find yourself with a more stable financial position, you may want to consider remortgaging to a better deal or overpaying your mortgage to reduce the term.
Early repayment charges (ERCs)
Many mortgage products come with early repayment charges, which can be a significant percentage of the outstanding loan amount. If you remortgage during the initial term, you may have to pay these fees. It’s essential to weigh the costs of remortgaging against the potential savings to determine if it’s worth proceeding.
Market conditions
Market conditions can play a significant role in determining when to remortgage. Factors such as interest rates, property values, and the overall economic environment may impact your decision. If the current market rates are lower than your existing mortgage rate, it could be a good time to remortgage. However, if rates are on the rise, you may want to wait and reassess the situation later.
Key Considerations
Credit score
Your credit score has a big impact on the kinds of mortgage deals you can get. It’s a good idea to check your credit report and address any issues before applying for a remortgage to increase your chances of approval and secure a better interest rate.
Affordability assessment
Lenders will look at your income, expenses, and other financial obligations to see if you can pay for a new mortgage. You may need to provide proof of income, bank statements, and details of your expenses. If your financial situation has changed since you first took out your mortgage, it’s essential to consider how this might affect your remortgage application.
Costs and fees
Remortgaging can come with various fees, including valuation fees, legal fees, and arrangement fees. Be sure to factor these costs into your calculations when comparing mortgage deals to ensure you’re making an informed decision.
Compare mortgage deals
It’s crucial to shop around and compare mortgage deals from different lenders. Consider factors such as interest rates, fees, and terms to find the best deal that suits your needs.
Consult a mortgage advisor
A mortgage advisor can guide you through the process of remortgaging and give you expert advice on the best time to do so based on your personal situation and the state of the market.
Final Thoughts
When is the right time to remortgage? It depends on your personal situation, like when your first term is up, how your finances have changed, and how much equity you have in your home. It’s important to think about the costs and benefits of remortgaging, as well as your credit score and how much you can afford. Getting help from a professional can help you figure out how to remortgage and make sure you get the best deal possible.
Get a free initial consultation from a mortgage broker.
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