What is remortgaging?
Remortgaging is when someone who has a mortgage shops around for a better deal. In doing so they’ll need to consider a few different things, including the current cost of borrowing which is derived from the Bank of England base rateThe interest rate that’s set by a country’s central bank. Commercial banks can sometimes use it to determine the interest rates they offer on their savings accounts and loans – including mortgages..
They’ll also need to consider the costs associated with remortgaging – which can include any early repayment fees for leaving their current deal, solicitor fees costs – and technicalities like whether they’d prefer a fixed or variable mortgage.
Homeowners tend to look at remortgaging when they’re coming to the end of their existing deal, if they’re looking for a better deal than their current lender is offering, or if they’re planning to use their property as collateral for a loan.
How does remortgaging work?
Think of remortgaging as a similar process to looking at different car insurance or phone bill deals when your existing contract is coming to an end. And, if you’re the type of person to always seek out the best deal on these things, but you don’t do it for your mortgage, you could be missing a trick.
You should keep in mind that if you do choose to remortgage before your current deal ends, there could be fees for leaving early or exiting your current mortgage deal. That’s why a lot of homeowners choose to start looking at remortgaging only when their current deal is coming to an end. Plus, you can lock in a new deal up to six months before your current mortgage ends, so it can really pay to get organised.
Is now a good time to remortgage?
With numerous interest rate rises from the Bank of England over the last 12 months, many homeowners are thinking about remortgaging – and they’re asking themselves the question: is now a good time to get a fixed-rate mortgage?
Well, most lenders have already factored in potential base rate increases into their mortgage deals and the mortgage interest rates they offer. Plus, mortgages tend to be based on swap rates, which are more forward-looking – so the base rate isn’t always the best indicator of what future mortgage interest rates might be. So before you remortgage, you should chat to a broker about your options.
It’s also important to say that no one knows with any real degree of certainty what the base rate will be more than a few months in the future. And, since banks use the base rate to determine the cost of borrowing for a mortgage, it could end up as higher or lower than a fixed-rate deal. It’s worth mentioning here that even though inflation is trending lower from its previous high, interest rate rises could still be possible in the future.
The benefit of a fixed-rate mortgage is that you’ll know what your monthly repayments will be further into the future than with a variable rate mortgage – which will fluctuate with the base rate. But, you’ll miss out on the benefit of a variable rate mortgage, which lets your mortgage move with current rates and not be tied in, allowing for greater flexibility.
Another thing to consider is how long the remortgage process takes from start to end. That’s because while now might be a good or bad time to remortgage, this might have changed by the time that your remortgage application completes.
Typically, remortgaging can take between four and eight weeks after your initial application. You can speed this up and come in towards the lower end of this range by providing the right documents when requested, which can include things like proof of earnings like your payslips or upcoming contracts.
With all that said, ultimately the decision to remortgage is yours and yours alone – and you’ll need to decide whether remortgaging is the best thing for you to do given your current circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
