Has being in Lockdown made you think about the needs of your home?
Caz Blake-Symes • June 12, 2020
Is this a good time for you to Remortgage – Part 1?
For many, being in Lockdown has made us look at our homes differently. There are many reasons for needing more space in your house. Maybe your growing family needs room for new arrivals or perhaps your expanding home business needs a new office. Whatever your reasons, there is much to consider before choosing the next step.
Deciding which is more financially beneficial, moving house or extending, can be tough. Of course, the decision will already be answered if you live in a flat and need more space, or you decide to move closer to schools, work or family. But the house removal costs will also affect your decision. You should compare removal quotes to get the best deal if you decide to move to a new house to help stretch your budget and allow for future work to be done.
An extension will help add value to your home as well as creating space, but again, the cost needs to be thought through. It is important to know which option will benefit you the most, so we have put together this guide to help you weigh up the pros and cons to make the decision easier.
Please take a good look at the information below, the first part of a two-part article about the pros and cons of remortgaging to fund possible home improvements, or just to look for a better deal or restructure your finances.
Remortgaging needs careful thought
Around a third of all home loans made in the UK are actually remortgages. For most people, their mortgage is their biggest financial commitment. And it follows that streamlining the largest debt can produce the largest saving - sometimes £1,000s each year. If you're the kind of person who shops around to get the cheapest television or mobile phone contract, then you're missing a trick by not using the same skills to save money on your mortgage.
But there are pros and cons to remortgaging. In Part 1 of this article we start off with talking about the reasons why you might want to remortgage.
Why should I remortgage?
The main reason that you might want to remortgage is to save money. And this can be big money. Reasons may include:
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.
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 is definitely worth a look.
You're worried about interest rates going up.
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 over payment. A remortgage will allow you to reduce the loan size and potentially get a cheaper rate as a result. But watch out for any early repayment charges or exit fees you face and compare this to how much you'd save with the new, lower mortgage.
You want to switch from interest-only to repayment mortgage.
You should not 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 under performing endowment mortgage which is expected to result in a shortfall at the end of the term.
However, it's a totally different story if you want to change from capital repayment to interest only - expect your lender to be difficult if you try to do this.
You want to borrow more.
Perhaps your current lender has said no to lending you extra money or the terms it's offering aren't very good. Remortgaging to a new lender might enable you to raise money cheaply on low rates. But remember to take all the fees into account to see if it really is cheaper than other forms of borrowing.
The new lender will ask you what the extra money is for. Surprisingly, it is likely to be more comfortable with you borrowing the money for a new car than for business purposes. The most commonly acceptable reasons to raise money are for home improvements and paying off other debts. Just be prepared for your lender to ask for evidence if you are borrowing a large amount, e.g. builder quotes, or proof that you have paid off the debts.
You want a more flexible mortgage.
Maybe you want to be able to miss a payment. Changing jobs, going back into education, going travelling – whatever the reason, there are mortgages which will let you take payment holidays. Or maybe you've been tempted by different, whizzy mortgages which combine your savings or current accounts with your mortgage.
Whatever flexibility you want in a mortgage, chances are it's out there. But remember products don't offer these twiddly bits for free. Expect to pay for flexible features with a slightly higher interest rate. So don't be tempted to go for bells and whistles unless you will actually use them.
If it sounds like remortgaging could be the right move for you, you want to start the search 14 weeks before you want to remortgage.
For further details and to book your FREE CONSULTATION with one of our expert Mortgage Advisers please contact us.
Bristol Mortgages Online www.bristolmortgagesonline.com Tel 0117 325 1511
Bath Mortgages Online www.bathmortgagesonline.com Tel 01225 584 888
Exeter Mortgages Online www.exetermortgagesonline.com Tel 01392 690 888
Email info@swmortgages.com
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