Is remortgaging right for me?
Mortgage Advice Bureau Network Partner Scotland explain the most common reasons for remortgaging, as well as some you may not have thought of:
1. Your current fixed deal is up for renewal
On a fixed rate mortgage, the interest rate remains the same and you pay the same amount every month. Once the initial term has ended, you’ll fall onto a standard variable rate (SVR), which could result in you paying a higher interest rate than when you were on your fixed rate deal. This is a common time for people to remortgage in order to find a better rate.
2. You want to move from interest-only to repayment
You may be on an interest only mortgage and want to move to a repayment mortgage. Your lender may be able to change this for you without a need for remortgaging, but if this is not the case then you may want to consider a full remortgage.
3. Want to be on a better rate?
It may be that you want to move to a mortgage with a better interest rate. However, lenders sometimes require you to pay an early repayment charge before you can switch deals, therefore it’s important to weigh up the price of the early repayment charge against the savings made by switching to a better rate.
4. You want to make overpayments
Your circumstances may be different now than when you took out your mortgage, meaning you can afford to make overpayments.Your current lender may have restrictions, therefore you might want to move to a different lender who will allow you to do this.
5. Borrow more money
Rather than moving house, you may want to consider making home improvements in order to make your house your dream home. Remortgaging is a way in which you can secure extra money for the cost of these home improvements. However, make sure to do your research and consider the costs involved in doing this, as it may be that a home loan is more suited to your needs.
There are also some situations in which remortgaging may not be the best option for you:
1. Little equity
You may be in ‘negative equity’, which is where you owe your lender more than your property is currently worth. In this situation, it may be difficult to remortgage, unless you have additional funds to repay the difference. However, each lender’s criteria is different and everybody’s circumstances are different, so don’t just assume this is impossible.
2. Your finances have dropped
Lenders need to see evidence of your income and your outgoings, as well as performing credit checks and affordability tests. If your income has decreased since you took out your last mortgage, lenders may be more cautious about lending you the money.
3. You are already on a low rate
You may already be on a low rate, meaning it’s not beneficial to move to another one as you can’t source a better rate.
4. Large early repayment charges
You may have to pay a large repayment charge if you decide to pull out of your current deal before the term is up, which may not make it worth switching. However, don’t let this put you off enquiring, as some lenders may consider waiving the fee if you are just changing deal and not lender.
Think remortgaging is the right option for you? Contact a specialist adviser today on 0800 652 6649, or Scotland@mab.org.uk.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There will be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.