Remortgaging is when you switch your current mortgage to a new deal, either with the same lender or a different one. It’s often done to save money with a lower interest rate, adjust the mortgage term, or release equity from your home.
Begin by evaluating your financial situation and researching current mortgage rates and products. Consult with a mortgage advisor, like Green Mortgages, who can guide you through options based on your specific circumstances, including whether to port your existing mortgage or apply for a new one. They can also help with the application process, documentation, and liaising with lenders.
Enhance your credit score by paying off debts and avoiding new credit applications. Save for a larger deposit, and ensure your financial documentation, like income proof and bank statements, is in order. A stable income and employment history also boost your application’s strength.
Deciding to remortgage when interest rates have increased can be a nuanced decision. Even if rates are higher than when you first secured your mortgage, it’s important to consider remortgaging, especially if your current deal is ending. Typically, at the end of a mortgage deal, you would be moved onto your lender’s Standard Variable Rate (SVR), which is often significantly higher than both your original rate and many current remortgage deals available in the market. Therefore, while remortgaging might not secure you a rate as low as your initial one, it could still be more cost-effective than moving to the SVR.
It’s crucial to compare the available remortgage options against the SVR to assess which option is more financially beneficial in the longer term. Consulting with a mortgage advisor can help you navigate this decision effectively, taking into account the broader financial landscape and your personal circumstances.
Changes in the housing market can significantly affect your remortgaging options, mainly through their impact on your property’s value. A rise in property value can increase your equity, potentially giving you access to more favourable remortgage deals, as a higher equity typically leads to a lower loan-to-value (LTV) ratio. A lower LTV ratio can qualify you for lower interest rates and better terms, as it reduces the risk for the lender.
Conversely, if the market dips and your property’s value decreases, your LTV ratio may increase, limiting your remortgage options and possibly resulting in higher interest rates. In extreme cases, if your mortgage balance becomes higher than your property’s value (negative equity), remortgaging can be particularly challenging. Keeping an eye on market trends and understanding the current value of your property is crucial when considering remortgaging. It’s often beneficial to seek advice from a mortgage broker who can provide insights into how market changes may affect your specific circumstances and options.
