Many homeowners are blissfully unaware of the money they could save by re-mortgaging their home. Whilst interest rates have seen some volatility, rates are starting to stabilise, inflation is coming down and mortgage deals have been getting cheaper in the second half of 2023. If you’re coming to the end of a mortgage deal on a historically low interest rate, you may wish to look at the options for re-mortgaging to protect yourself from any further interest rate volatility.
What is Remortgaging?
For those who are not familiar with the term, re-mortgaging simply refers to the process of switching to a different mortgage deal or provider, while staying in the same home. It is a smart move that can help ensure that you are not paying more for your home than you need to be. In this blog post, we will explore why it is so important to consider re-mortgaging your home well before the current deal expires, to help secure the lowest interest rate possible.
Why do you need to Remortgage?
Firstly, re-mortgaging can help you lock in the best rate possible. Mortgage rates are constantly changing, and it’s essential to keep an eye on them, especially if your current deal has a incentive rate that’s due to end soon. This is because once your current deal expires, you will automatically be moved onto your lender’s standard variable rate (SVR), which is often significantly higher than the rate you were previously paying. By re-mortgaging before your current deal expires, you could potentially switch to a new fixed deal that will give you full control over your monthly payments and guard against any future rate hikes, for a set period of time. Most fixed rate mortgage deals lock you in for a period of between 2-10 years.
Secondly, re-mortgaging can help you release equity from your home. Equity is the difference between the value of your property and the outstanding mortgage debt. If you have been paying off your mortgage for some time, the value of your property may have increased, and this can work in your favour when it comes to re-mortgaging. By opting for a new deal, you may be able to borrow more money, either to invest in renovations or to pay off other debts, at a lower rate than you would with a personal loan or credit card.
Thirdly, re-mortgaging can help you pay off your mortgage faster. Many homeowners opt to re-mortgage to switch to a shorter-term deal, which can help them pay off their mortgage years earlier than they would have done otherwise. By reducing the term of your mortgage, you’ll likely have to pay more each month, but it can also save you thousands of pounds in interest, as well as the security of owning your home outright sooner than expected.
Fourthly, re-mortgaging can help you switch to a more flexible deal. Your current mortgage deal may not be suitable for your current financial situation or your future plans. For example, you may want to take a career break, start a family or become self-employed, and your current mortgage deal may not offer the flexibility you need to make these life changes. By re-mortgaging to a more flexible deal, you can have the peace of mind that your home loan is working to suit your needs, rather than the other way around.
And did you know that you can secure the best interest rate up to 6 months’ in advance of your existing deal ending. Even if a better rate becomes available closer to the time of your deal ending, you’ll be able to switch to that deal instead. So, it’s worth locking in a rate as soon as possible.
Conclusion
In conclusion, re-mortgaging your home loan is a necessary and important financial decision that can offer many benefits. Whether you want to lock in the best rates, access equity, pay off your mortgage faster or switch to a more flexible deal, it’s essential to consider this option well before your current deal expires. Ultimately, the key to re-mortgaging successfully is to do your research, shop around, and negotiate to ensure that you get the best possible deal and that it is right for you and your personal circumstances.