With inflation ballooning, we’re all feeling the crunch right now. If you’re a homeowner looking to save money on your monthly outgoings wherever you possibly can, remortgaging your property could be the perfect hack for you.
As time goes on, remortgaging (the process of taking out a new mortgage on a property you own) is becoming an ever more popular choice, with remortgages making up approximately one third of total home loans in the United Kingdom.
The motivations behind why people opt to remortgage vary, but can typically be categorised into one of two reasons, with individuals remortgaging either to replace their existing mortgage; or also very commonly, to release the equity in their home and borrow against the value of their property.
Why you ought to consider remortgaging
Many of us tend to relate the idea of remortgaging to taking on more debt through releasing equity in our home. Whilst this is a common reason for taking out a new mortgage, the real power of remortgaging is not so much the way in which it can provide us with a cash injection, but rather how it can enable us to save money on our monthly repayments.
In order to tap into the power of remortgaging and make savings on your payments, you may want to consider it as an option if any of the following apply to you…
Your current mortgage rate is coming to an end
Standard practice means that once your existing mortgage rate ends, your lender will typically move you on to their standard variable rate (also known as SVR). Very often, this rate is more expensive, meaning you’re likely to see an increase in your monthly repayments.
This is a critical point at which homeowners ought to consider remortgaging. In order to avoid paying more, it’s essential that you explore switching mortgage rates with your existing lender or possibly even exploring switching to a new lender.
It’s advisable to start researching and considering your options for remortgaging around 3 – 6 months before your current rate comes to an end. This way, your new deal can begin in time for your current one ending.
You’re keen to find a better deal
It’s possible that you may happen across a lower rate which would serve to reduce your monthly repayments, enabling you to pay less interest over the full course of your mortgage.
A better deal may also be one that allows you to overpay or perhaps even to change your mortgage term. We all need different things from our mortgage plans, so it’s always a good idea to speak to a mortgage advisor in order to benefit from guidance that is tailored to your needs and priorities.
It’s important to bear in mind that if you remortgage before your current deal comes to a close, you may be subject to early repayment charges (ERC’s) amongst other potential fees. So, if you opt to make a switch before your plan ends, ensure you’ve done all the necessary working out so that you can be sure that your potential savings outweigh any possible charges. It’s always an option to avoid fees such as ERC’s by simply waiting for your current deal to end.
The value of your home has gone up (whoop!)
As house prices tend to rise with inflation, many homeowners may be pleased to find that the value of their property may increase soon enough.
If the value of your home increases, you could certainly benefit from a lower loan-to-value ratio (known as LTV). Your LTV refers to your outstanding mortgage total in relation to the value sum of your property. This is shown as a percentage.
If your LTV goes down, you will potentially be eligible for lower rates on your mortgage. In order to explore this, get in touch with your lender and enquire about your current LTV ratio. If it has changed, you can discuss what new interest rates may now be available to you as a result. If your lender can’t come up with a deal that you’re happy with, it may be a prime time to see what other lenders on the market may be able to offer.
*Disclaimer: Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.*
Trying to make your mortgage work for you can be tricky business. Be confident that you’re making the right choice by remortgaging and speak to one of our excellent advisers today.
