The UK mortgage market is constantly changing, and with interest rates making headlines, many homeowners are asking the same question: "Should I re-mortgage now?" The answer isn’t always straightforward, but understanding your options is the first step towards making a smart financial decision that could save you a significant amount of money.
This guide will walk you through what re-mortgaging means, the key reasons to consider it, and when it might be better to wait.
What Exactly is Re-mortgaging?
Re-mortgaging is the process of switching your existing mortgage to a new deal. You can do this in two ways:
- A Product Transfer: Staying with your current lender but moving to a new interest rate. This is often a simpler process with less paperwork.
- A Re-mortgage: Moving your mortgage to a completely new lender to take advantage of a better deal available on the open market.
Most people re-mortgage when their initial introductory deal (e.g., a 2-year or 5-year fixed rate) is coming to an end. If you do nothing, your lender will automatically move you onto their Standard Variable Rate (SVR), which is almost always significantly more expensive.
4 Key Reasons to Consider Re-mortgaging Now
1. Your Current Deal is Ending
This is the most common and compelling reason to re-mortgage. The SVR can be several percentage points higher than the fixed-rate deals available. By planning ahead and securing a new rate 3-6 months before your current deal expires, you can ensure a seamless and money-saving transition.
2. You Want to Lock In a Better Interest Rate
If interest rates have fallen since you took out your mortgage, you could save a substantial amount on your monthly payments by switching. Even a small reduction in your rate can add up to thousands of pounds over the term of the deal. It also provides payment security, as a fixed rate means you know exactly what you'll be paying each month.
3. You Want to Borrow More Money
Re-mortgaging can be an effective way to release equity from your property. Homeowners often do this to fund major life expenses, such as:
- Home improvements like an extension or new kitchen.
- Consolidating other debts with higher interest rates into one manageable payment.
- Paying for a wedding, a car, or university fees.
It's important to remember that borrowing more will increase the size of your mortgage debt and your monthly payments.
4. Your Home's Value Has Increased
If your property's value has risen significantly, your Loan-to-Value (LTV) ratio will have decreased. LTV is the percentage of the property's value that you are borrowing. Lenders offer their most competitive interest rates to borrowers with lower LTVs (e.g., 60% LTV), so you may find you now qualify for much cheaper deals.
When Might It NOT Be the Right Time to Re-mortgage?
- You Have a High Early Repayment Charge (ERC): Most fixed-rate deals come with an ERC if you leave before the term ends. This is usually a percentage of your outstanding mortgage balance and can often be so high that it cancels out any potential savings from switching early.
- You Have a Very Small Mortgage Remaining: If you only have a few thousand pounds left to pay, the legal and arrangement fees associated with re-mortgaging might cost more than you would save in interest.
- Your Financial Circumstances Have Changed: If your income has decreased or your credit score has worsened since your last application, you may not be eligible for the best deals on the market. In this case, a product transfer with your existing lender may be a better option.
Let Me Guide You
Navigating the mortgage market can be complex, but you don't have to do it alone. As an experienced mortgage advisor, I can compare hundreds of deals, calculate the real costs, and help you decide if now is the right time for you to act.
Contact me, Phil, today for a free, no-obligation chat about your re-mortgaging options.