However, knowing the right time to remortgage and understanding the costs involved can make a significant difference in achieving your financial goals. Whether you’re approaching the end of your current mortgage deal or exploring ways to lower your interest rate, this guide will explain when and why it makes sense to consider remortgaging.
When Should You Remortgage?
There are several situations when remortgaging might be the right decision:
- End of a Fixed-Rate Mortgage: One of the most common times to remortgage is when your fixed-rate mortgage is coming to an end. Once your fixed term expires, you’ll likely move onto your lender’s standard variable rate (SVR), which can fluctuate and is often higher than your previous rate. To avoid potential increases in monthly payments, it’s advisable to start looking for new deals around six months before your fixed rate ends. [1]
- Lower Interest Rates: If market interest rates have fallen since you took out your current mortgage, remortgaging could allow you to secure a lower rate and reduce your monthly payments. This is especially important in the current climate where interest rates can change rapidly. [2]
- Increased Equity: If your property has increased in value, remortgaging can provide two main benefits. First, the increased value may place you in a lower loan-to-value (LTV) band, allowing you to access better interest rates. Secondly, you may choose to borrow more by increasing your mortgage to fund projects like home improvements or consolidating debt. However, it’s important to note that increasing your loan size means you’ll be borrowing more, so careful consideration is necessary before proceeding. [4]
Key Factors to Consider
When deciding whether to remortgage, take these important factors into account:
- Early Repayment Charges (ERCs): If you’re still within the fixed-rate period of your current mortgage, remortgaging early could mean paying ERCs, which are typically a percentage of your remaining loan. These costs can be substantial, but they decrease as you near the end of your fixed term. [3]
- Arrangement Fees: Many remortgage deals come with arrangement or booking fees. While remortgaging may give you a cheaper rate and reduce monthly repayments, it’s important to know any additional costs before going ahead.
- Valuation and Conveyancing Fees: You may need to pay for a property valuation and legal fees for conveyancing, although some lenders offer free valuation and legal services as part of their remortgage package. [1]
Potential Savings from Remortgaging
By remortgaging to a better deal, homeowners can make substantial savings on their monthly payments. For example, if you’re moving from an SVR of 6% to a new fixed-rate deal at 4%, the reduction in interest payments can make a noticeable difference. Furthermore, if you choose a fixed-rate mortgage, you’ll benefit from the certainty of knowing your payments won’t increase over the next two to five years. [1]
