When Is The Right Time To Remortgage?
If you were thinking about moving, but have decided now’s not the right time, it could be a good opportunity to review your current mortgage. In this article, we explain the ways in which a remortgage can be used and if it’s right for you.
I CAN AFFORD MY MORTGAGE, SO WHY SHOULD I BOTHER CONSIDERING TO REMORTGAGE?
We often hear people say something like this and it’s quite an odd one really. Banks love customers that stay put.
Many people shop around for insurance and utilities to save £20pm, but they’ve never stopped to think about their mortgage. It’s possible that the savings you make with insurance and utilities could be dwarfed by your mortgage.
It’s not uncommon for there to be cheaper offers for you elsewhere. An easy way to find out is by searching a price comparison website. You may not be eligible for every deal on there, but it gives you a good idea. Alternatively, you can contact a local mortgage broker to compare deals on your behalf if you haven’t got the time.
If you’ve had your mortgage a long time, then you could be on a low Bank of England tracker deal. You may even be paying less than 1%. If this is the situation you find yourself in, you might be tempted to leave that mortgage where it is for now. However, your payments will increase if the base rate goes up, so make sure to keep an eye on that.
CAN I BORROW MORE MONEY FOR HOME IMPROVEMENTS?
Subject to the usual affordability checks and assuming you have equity in your property… yes!
This can be a good investment if you use the money wisely. Often, we see customers do this to facilitate building an extension or converting their loft. Both of which will add value to the house.
CAN I BORROW MORE MONEY FOR OTHER REASONS?
You can borrow extra funds for most legal purposes, examples of this would be:
- Debt Consolidation
- Property Investment (e.g. into a Buy to Let)
- Consumer purchases
- Gift to relative
Remember by increasing your mortgage you will end up paying back more interest, so you need to be sure you are doing this for the right reasons.
IS IT A BAD IDEA TO ADD UNSECURED DEBT TO MY MORTGAGE?
You must be aware that it can be a bad idea to add debt to your mortgage. This is because you will end up paying back more interest overall by essentially extending the term of your debts to make the payments lower.
You are also taking debt, which is not secured, and securing it on your home. This puts you at risk of repossession if you cannot keep up repayments. Consolidating debts that you can afford or credit cards that are at 0% interest will almost always the wrong thing to do.
However, if you need to reduce your monthly outgoings to avoid missing payments, which could damage your credit rating, then it might be a viable option.
WILL MY CURRENT MORTGAGE PROVIDER OFFER ME REMORTGAGE DEAL?
Often, they will offer you a new deal. They may refer to it as a “Product Transfer” or “Retention” product, but it is essentially the same thing.
It’s not guaranteed that they will offer you anything and you’ll probably have to contact them directly to find out if there is anything available. In some cases, you can make a product switch online without taking advice or providing further information/documentation. But just a couple of words of warning here…
Firstly, whilst it may be easier to stay with the same provider you may find that you could save a lot of money by moving, despite the hassle.
Also, and most annoyingly of all, many Banks still offer preferential rates to new borrowers over existing ones. One day, Lenders will get their act together and realise that rewarding loyalty is best for everyone. But until then, it always worth shopping around.
Please note that the above information is for reference purposes only and is not to be viewed as personal financial or mortgage advice.