When Should You Re-mortgage?
Re-mortgaging is the process of changing your mortgage deal and this could be for a number of reasons. The reason why you are re-mortgaging may impact when you need to do it. So in this article we are going to look at when you should re-mortgage and tips for the process.
Why should you re-mortgage?
Most people have a mortgage if they own a home. The length of time a fixed-rate mortgage lasts for, can vary. Typically, when the initial fixed rate period comes to an end, it’s time to get another deal secured. That means either re-mortgaging or getting a product transfer.
A product transfer is basically a re-mortgage with the same lender. It can involve a little less work and can be a bit quicker. Re-mortgaging is typically via a brand new lender. This can involve getting a valuation of your home and reappraising your ability to support the level of borrowing.
Other reasons for re-mortgaging are to borrow an additional sum of money or because there is a better rate available. Both of these are valid reasons for considering a re-mortgage, however they should be approached with caution. Additional borrowing and exit fees on your current mortgage could make re-mortgaging very costly or at least a prospect that might be worth delaying.
When should you re-mortgage?
When your current deal i.e. fixed rate or tracker rate is coming to an end, as it is generally not advised to revert back to the standard variable rate (SVR). This is because it’s usually higher than what a new fixed or tracker rate amount would be. This is the most common time to re-mortgage and would mean it is very unlikely that any early repayment or exit charges would become applicable.
It’s possible to agree on a new mortgage rate up to six months in advance of your current one ending, so if you’re within that time frame, it’s time to start looking. The more time you give yourself to prepare, the less stressful the situation should be. This also allows plenty of time for your new mortgage lender (if that’s the route you go down) to value your home and for everyone to complete the necessary paperwork.
So ideally the more time you have to prepare the better right? Well, if interest rates are rising quickly or particularly volatile, you may wish to re-mortgage quicker. If you’re in a situation where you’ve left it less than three months, a product transfer could be your only option to lock in a good rate before it’s too late.
You may also wish to re-mortgage because there are more attractive repayment terms in a different mortgage. For example, being able to overpay or take a payment holiday.
When should you avoid re-mortgaging?
If your mortgage debt is small or the early repayment fees are very high, it might not be worth the change at this time. This is also true if your credit score has gone down or you’re experiencing financial hardships. Although re-mortgaging and taking out a loan might seem like a good idea, it might not be as helpful as you think.
It is also not advised to re-mortgage if your home has fallen in value. Unless you need to avoid going on an SVR, holding off for a while will hopefully mean your house value will rise again.
Can a mortgage broker help with re-mortgage?
Mortgage brokers aren’t just there to help with a first mortgage, they are an invaluable asset for re-mortgaging too. A mortgage broker, like the team at Grange Mortgages, are equipped to find you the best deal. They will help despite any difficult economic uncertainties.
In an article about re-mortgages, Money Saving Expert recommend a using a broker. They help you navigate the process and make the best decision for your circumstances.
Read our guide for Getting Started with a Re-mortgage. It goes into more detail about the process. Then get in touch with us and we’ll help you from start to finish.