Remortgaging is a hot topic at present with interest rates currently very competitive. Find out whether remortgaging might be a suitable option for you.
Remortgaging means moving your mortgage on your existing property to a new deal with your current lender or moving to a new lender to save money.
It’s a subject that has been covered a lot in the media lately, and it’s easy to see why. Interest rates are at an all-time low. You can find an interest rate of less than one per cent on your mortgage if you have at least 40 per cent equity in your home. Competition among lenders has become fierce where mortgages are concerned as the property market is currently very active. It has been boosted by the stamp duty holiday and many existing homeowners seeking bigger properties with more space to work from home.
Some two-year fixed rates are as low as 0.95 per cent. Last month, TSB launched a new remortgaging deal of just 0.99 per cent. The deal is a two-year fixed-rate mortgage for those remortgaging at up to 60 per cent loan-to-value. In other words, you would need a deposit of 40 per cent of the property’s value.
Switching to a new deal
As mentioned, when you remortgage you can either switch to a new deal with your existing lender or move to a new lender. In 2020, 1.5 million people remortgaged according to UK Finance. Saving money is the key reason for many, but other reasons to remortgage include wanting to borrow more money to carry out home improvements or wanting to make a large overpayment if you inherit some money or receive a large bonus.
It’s important to be aware that if you remortgage before the end of your fixed rate term, you may face an early repayment charge or an exit fee. However, it may still be worth remortgaging as you could save a considerable sum on your monthly mortgage payments on a more competitive deal.
Some households are facing a dip in income due to the pandemic, and this has led to some homeowners to think about remortgaging to free up capital. We recommend seeking advice from a reputable mortgage broker so that you’re clear on fees you may have to pay. There may be other options open to you, such as switching to an interest-only mortgage, which will reduce the monthly payments, or extending the repayment term of your current mortgage. However, in each case, you will pay more interest. On a repayment mortgage, as you pay off some of the capital of the loan each month, the interest rate will begin to come down.
Mortgage term
If you do go ahead and remortgage, the term of your new deal is most likely to be fixed for two to five years. However, there are also some longer-term competitive mortgage products. Barclays currently has a fixed seven-year rate deal at 1.49 per cent for those borrowing up to 60 per cent loan-to-value, while Virgin Money has a ten-year fixed rate deal at 1.95 per cent. Borrowing is certainly very cheap.
Whatever the term of your mortgage, at the end of the fixed-rate term, you will be switched to your lender’s standard variable rate unless you move to a new mortgage deal.
Feel free to contact us for more information about remortgaging.