Buying a home is one of the biggest financial commitments that somebody can take on. It’s not just the cost of the house to consider; there’s furnishing your home, the upkeep and maintenance, and of course, mortgage repayments if you were not a cash buyer.
You wouldn’t buy the first car you see, and you wouldn’t keep your current vehicle if something more up to date, with better fuel economy and cheaper repayments came up – so why would you do the same when it comes to your mortgage?
As with any other investment, remortgaging when you find a better deal needs careful thought to ensure you’re getting the most out of your finances.
Here are some of the reasons you should remortgage, as well as some instances where it will not be worthwhile.
YES: Reasons To Remortgage.
Here are some of the reasons why you should keep the option of remortgaging on the cards.
Your present deal is coming to an end
Remortgaging can save you a lot of money over time if you manage to find an agreement that allows for that. Some of the best mortgages on offer will only last for a short amount of time, mostly between two and five years. This is the length that is often offered on a discount, tracker, or fixed-rate mortgage.
When these deals come to an end (bear in mind that mortgages can often take 20+ years to pay back!), the mortgage provider will automatically put you on a deal with a standard variable rate, one that is likely to be much higher than some of the other mortgage products available.
You want to increase payments, and your lender won’t allow that
Maybe you inherited a large sum of money, or you got a pay rise at work. Quite often, the first thought that comes to mind when you come into cash is to pay off some of your debts and this could include increasing the repayments for your mortgage. However, some lenders are pretty strict when it comes to altering the repayment terms.
Remortgaging allows you to decrease the size of the loan, meaning you could potentially get a cheaper rate. As with any contract, check that there are no early exit fees or repayment charges and compare those to the potential savings with those fees before deciding to switch.
Read the small print and shop around, but don’t be afraid to make the switch when something better comes along. You should consider looking into this around 14 weeks before your current rate is due to come to an end.
You need to raise some capital
You might find that you want to raise some money, perhaps to pay off some debts or fund some home improvements. Remortgaging allows you to do this by borrowing more against your home and making the repayments, perhaps at a lower rate and over a longer period than you would find with other forms of finance.
Home improvements are a great way to add value to your home, perhaps lowering your loan to value and making you eligible for a lower mortgage rate.
NO: Stay With Your Current Deal
Of course, along with any good reason to do something, there’s always going to be another reason not to do it.
You have only a small amount of equity
When the amount you need to borrow reaches more than 90% of the value of your property, you will have a hard time trying to find a better rate. At present, you can get a 95% mortgage with a small deposit on newbuild homes. It’s still worth checking this to see if it is worth making the switch after checking to see if there are any high-cost exit fees when you choose to do so.
You’ve Damaged Your Credit Since Taking Your Original Deal
In recent times, lenders have become pickier about who they will lend to. Since the Credit Crunch, The Financial Conduct Authority requires mortgage lenders to check the mortgage is affordable for potential customers, not just at the present rate they are being offered. Still, in case the prices increase over time.
Lenders will ask a lot of details around current earnings and outgoings to check you can afford the repayments.
However, a missed credit card payment, loan repayments, or missed utility bill can damage your chances of getting a good mortgage deal. Always keep an eye on your credit score.
At Fosters Financial we can help people with adverse credit by working with a number of specialist lenders, so it’s worth getting in touch to see if there’s a better product available for you.
You only have a small amount to payback
Your remaining loan could be below a certain amount and would, therefore, not be worth making the switch with consideration of switching fees.
At Fosters Financial, our experienced mortgage advisers are committed to making sure you’re on the right deal for your circumstances and for what you want to achieve with your mortgage.