Reasons To Remortgage Your Home
There can be a whole host of reasons why there is a need to remortgage but mostly it is to save money.
You are on the SVR
SVR stands for standard variable rate and this represents the lenders normal rate after a special deal has ended or in fact before any discounts or offers are applied in the first place.
For instance, you may have taken a discount rate for 2 years at 1.44% on your £150,000 interest only mortgage when you took out the mortgage. Your monthly mortgage cost is £180. Once the 2-year discount deal is over you will go on the lenders SVR (standard variable rate) which varies from lender to lender but let’s assume it is 4.54%.
Your monthly mortgage cost will increase to £568 which is a massive £388 difference if your interest rate jumps from 1.44% to 4.54%. The monthly payment has doubled! This means that the mortgage lender is making a massive profit out of you each month and you should be plugging the hole in your finances as soon as possible.
One solution is to seek a new deal from your lender but often mortgage lenders favour new customers when offering the best deals and not loyal customers. It is just not in your lenders best interest to take you off the SVR.
A more likely solution is to remortgage to a new lender. The rate is more likely to be competitive and if you use a “whole of market” mortgage broker (like us) you can not only benefit from a low rate but also a remortgage lender fees free deal with valuation and legal work done at no cost.
Your Deal is about end
If your deal is about to come to an end you most probably will not want to go on the SVR (standard variable rate) as your mortgage payments can shoot up quite considerably. This is less money in your pocket and more profit in your mortgage lenders. There is a staggering amount of people on the SVR in the UK and unaware just how much extra they are paying.
You should be planning your remortgage around 3 months ahead before your current mortgage deal ends.
It is always worth checking to see what your mortgage lender offers but most competitive rates are available to new mortgage customers hence why many people remortgage to a new lender.
We can advise on and arrange your remortgage by helping you get the best possible rate and a free valuation and legal work from the new mortgage lender.
You want more Flexibility
If your current lender cannot offer you the flexibility to make overpayments, underpayments, take payment holidays or the ability to link your savings balance to your mortgage you may want to consider remortgaging to a lender who can offer you the facilities that you need.
Perhaps you have inherited some money or received a bonus or pay rise and want to reduce your mortgage liability. Some people want the ability to take payment holidays to go back into education or even to go travelling and need a mortgage lender that can accommodate your change of circumstances.
Before leaving your current lender we will look at the mortgage you currently have to make sure what the terms are and whether there are an early repayment charges.
You want a Better Rate
It is always worth looking at your current situation to see whether you can make any savings on your monthly payment. If you are on the lenders standard variable rate it is definitely worth shopping around for the lowest rate amongst the mortgage lenders most suitable for your needs.
Perhaps you are in a mortgage deal where there is no early repayment charge. If there is an early repayment charge it is worth doing the figures to see if there are any long term savings by paying it and taking a new deal.
You want to Borrow more Money
Borrowing extra money when remortgaging is quite common as many people wish to take the opportunity to borrow money against their home at a low rate for home improvements, paying debts, paying for school fees, a holiday or car. You can borrow extra money against your home for most things except for paying tax liabilities.
The amount you can borrow on a remortgage depends on the value of your property, your current loan size and affordability.
Your Property Price Increases
This is not as silly as it sounds. Many lenders will offer a better rate to people who have 60% loan to value (LTV) on their home as opposed to people with 75%, 80%, 90 % and 95% loan to value bands. The more equity you have in your home the better the rate within the common LTV bands.
If your property is worth £100,000 and you put down a £25,000 deposit you will have a loan to value of 75% LTV as the mortgage will be £75,000. This means that you have £25,000 of equity in the property. You will get a mortgage deal based on the fact that you have a loan to value of 75% which will be a lower rate than the other high loan to value bands.
If the property value goes up to £125,000 and your mortgage of £75,000 still stands then your LTV has just decreased which will entitle you to a deal for people with a loan to value of 60% or less.
This could be a good reason to remortgage as you will get a better rate if you have more equity in your property.