Why should I remortgage?

Why should I remortgage?

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Your current deal is about to end.

Many of the best mortgages only last a short time – often two to five years – the typical length of time offered on a fixed rate, tracker or discount mortgage.

When it comes to an end, your lender will put you on its bog standard variable rate (SVR). It’s likely to be higher than your old interest rate and higher than the best buys available. If so, you want to be ready to remortgage to a cheaper rate. Start looking around 14 weeks before your rate ends.

So, remortgaging worked for him but will it work for you? Here are the reasons you might want to do it.

You want a better rate.

If you are tied into an initial deal then you might have to pay an early repayment charge which can be huge, often 2-5% of your outstanding loan. Plus, there is usually a small exit fee (it might call it an 'admin fee' or a 'deeds release fee') when you repay any mortgage.

This doesn’t mean you shouldn’t consider it as the savings can be huge (especially if you have a large amount of mortgage debt). You just need to do your sums before taking the plunge.

Your home's value has gone up...a lot.

If the value of the property has risen rapidly since you took out your mortgage, you may find you’re in a lower loan-to-value band, and therefore eligible for much lower rates. Again, you need to do your sums but it’s definitely worth a look.

You're worried about interest rates going up.

Whoa there! Before you panic, you need to check what is meant by rates going up. If it’s the Bank of England base rate that is predicted to go up, this may affect your mortgage payments directly, depending on the type of mortgage you have. If it’s the rates that new customers are being offered, then this doesn’t automatically mean yours will be affected.

You want to overpay & your lender won't let you.

Perhaps you’ve had a pay rise or maybe you’ve inherited some money. You now want to pay extra but your current deal won’t let you or it will only let you make a small overpayment.

You want to switch from interest-only to repayment mortgage.

You shouldn't actually need to remortgage to do this, your lender should be happy to make the change for you. You can even change part of the loan to capital repayment and leave some on your interest-only deal, which is particularly useful for anyone with an underperforming endowment mortgage which is expected to result in a shortfall at the end of the term.