25th July 2023: With more than 2.4 million deals ending in 2024, fears have been raised about a financial timebomb as homeowners face a significant jump in their repayments. With many homeowners now exploring how they might refinance their mortgage, Felicity Holloway, who heads up mortgages at Moneybox Home-buying, has revealed how those impacted can navigate their remortgage journey with greater confidence.
Preparation is key
Just like when applying for a mortgage to buy a first home, homeowners needing to remortgage in the near future should make sure their financial records paint the best possible picture of their financial situation, to maximise chances of securing the best rate from a lender.
Gather and review all supporting documentation in plenty of time including ID, wage slips, and bank statements, and triple-check that credit report details are up to date and accurate.
Even though homeowners will have been making repayments on their mortgage for a number of years at this stage, a lot of factors can impact credit scores – it continues to play a big part in both your ability to remortgage and the rate you may get offered.
For example, regular bills – including utilities or your phone bill – count towards credit scores, no matter how small. Make them all on time, and it will boost it up – but miss them, and it will fall.
Homeowners will also need to ask their current lender for a redemption statement – this shows the amount left to repay, and how much you’ll need to borrow.
It’ll also detail any early repayment charges or exit fees if homeowners are leaving their current deal early – so make sure these are factored into any decisions.
Ask ALL your questions
There is no doubt it can feel overwhelming for homeowners at times when it’s hard to turn on the news without hearing about interest rates and the impact of the rising cost of mortgages. However, it’s important to look beyond these headlines and dont assume that the worst-case scenario will necessarily apply to you.
All homeowners can get expert, free, and impartial advice from mortgage brokers and so shouldn’t be afraid to quiz them and get all their questions answered before they start a mortgage application.
A broker will be able to assess your circumstances and let you know what is actually available to you in the market. It’s also important to quiz any broker you may be thinking of working with on their processes and find out if they are whole of the market.
Some mortgage brokers are tied to one lender or a small panel – which could result in missing out on a better deal so this is essential to know before appointing anyone.
Never accept the first offer
Felicity also reminds homeowners they should never take the first mortgage offer they receive – as there are often better deals out there. Most homeowners will be contacted by their existing mortgage lender, 6-9 months before a fixed deal ends, and be offered a new rate – a ‘Product Transfer’.
While it might be tempting to just log on and sign up for this offer because the process is so simple, with rates being so high it’s important to do proper research to make sure that it’s the best deal available. A mortgage broker can do a comparison of the ‘Product Transfer’ rate you have been offered and advise you how it compares with the best rate and package that you’re likely to get elsewhere.
Secure an offer early but keep an eye on the changing rates
Because the market is so volatile, there could be a temptation for those planning on remortgaging in the not-too-distant future to sit tight and hope rates fall.
However, this is a very risky strategy and could see households end up on a Standard Variable Rate, which invariably, will result in much higher mortgage repayments.
With that in mind, Felicity suggests securing a new deal in principle six months before the existing one ends – but still keeping an eye on interest rates.
So, if a better deal does come along, and there’s enough time to get a new application submitted and processed, brokers will be able to handle this before the existing deal ends.
Felicity has also reassured homeowners that lenders work into affordability a ‘stress test’ at the application stage to ensure mortgages remain affordable even if rates rise.
So, for example, if someone took out a mortgage five years ago at two per cent, then the lender would have certified affordability to ensure that they could afford a much higher amount. Although it may be financially uncomfortable to pay out more after remortgaging, in theory, they should be able to afford it based on their income.
A mortgage broker will also be able to advise if is possible to reduce the cost of repayments by going interest only or extending the mortgage term, both of which can be adjusted in the future when there is less pressure on personal finances.
– ENDS –
Moneybox is the award-winning app on a mission to help people build wealth with confidence so they can enjoy life, today and tomorrow. Launched in 2016 by co-founders Ben Stanway and Charlie Mortimer, the company has experienced rapid growth, and today has over £4bn in assets and a community of more than 1 million customers. Moneybox provides a range of great value products and services, across saving, investing, home-buying, and retirement as well as helpful tools and educational content, to help people manage and achieve their short, mid, and longer-term financial goals. Moneybox enables customers to set money aside in the way that suits them best using round-ups, regular deposits, or instant payments. In March 2022 Moneybox raised £35m in a Series D funding round, led by Fidelity International Strategic Ventures, existing investors Oxford Capital, CNP, Burda and Breega, plus new investor Polar Capital. This brings total funds raised by the digital wealth manager to £100+ million.
Head of PR & Comms
Joanne.email@example.com / 07791894469