When can I remortgage?
There are benefits to remortgaging as long as you do it at the right time.
This guide explains why some times are better than others. We’re going to outline in which situations a remortgage may be advantageous, and when it might be better to wait.
Good times to remortgage
The fixed rate is about to end
Variable rate mortgages mean your payments rise and fall over time. They are either a tracker, discount or Standard Variable Rate (SVR) deal. Lenders are likely to put you on an SVR after a fixed rate term ends.
Fixed rates can be cheaper than an SVR over time, so switching to a new mortgage may allow you to stay on a lower interest rate.
Your property has increased in value
The loan may have become a smaller proportion of your home’s value. Your Loan-to-Value (LTV) ratio can drop if your property is now worth more than it was when you first bought it. And a lower LTV means lower interest on your repayments.
You want to borrow more
There are many reasons that you may want to borrow more money – wanting to make improvements on your home, for example.
If your home value has increased, you have more equity. Take out a mortgage that is a bigger loan than your existing one, and you’ll be ‘borrowing against equity’. If you had £150,000 left on your current mortgage, remortgaging for £160,000 would give you a £10,000 cash lump sum.
You want more flexible terms
Overpaying on your mortgage can lower the cost of interest over the years. But if the overpayment limit is only 10% of your remaining loan, for example, remortgaging can lead to better terms. You can then pay off more of the new mortgage in one go, forking out less in the future.
Bad times to remortgage
The Early Repayment Charge period is still active
It’s generally not advisable to leave a deal early if you’re going to get an Early Repayment Charge (ERC) that will cancel out any savings you’d make by moving. These charges tend to be on a fixed rate, tracker or discount mortgage, not SVRs.
A better time to remortgage would be when your fixed deal is transferring to the SVR and you can avoid the charge.
Your circumstances have changed
A lot can happen in life – a new job, marriage, children. Anything that affects your earning power may affect how beneficial a remortgage could be.
The property might be worth less now, for instance, instead of more. You or your partner could be temporarily out of work. Credit issues could’ve sprung up in the last couple of years. In these cases, it might be preferable to wait for a better time to remortgage.
Get personalised, expert advice on remortgaging. Try our Mortgage Matcher for free – select ‘Remortgage’ and see if now is the right time for you to seek a new deal.