What is Remortgaging ?

Many may think of remortgaging as something that has to be done out of necessity, for example, in the circumstance of financial difficulty, which could not be further from the truth. The process of remortgaging simply involves switching your current mortgage deal to another one. This can be done through your existing mortgage lender, or a different one if they offer more favourable mortgage terms. 

What a lot of people don’t know, is that remortgaging should be considered by everybody whose fixed-term contract is coming to an end. Those who don’t, are at risk of being hit by the standard variable rate, which can sometimes even double the amount of interest they have previously been paying.

Look at it this way. When your internet or mobile phone deal comes to an end, the usual course of action is to switch to another provider, to ensure you are not overpaying for the same service in the future. Why not do the same with your mortgage?

The moment you lose the security that comes with your fixed-rate mortgage deal, your monthly outgoings automatically become unpredictable. Alongside rising inflation rates bringing up the price of common household goods and services, your mortgage can now rise in price significantly too, and become an unnecessary financial burden. 

How do standard variable rate mortgages work?

Variable-rate mortgages can initially appear slightly cheaper than their fixed-rate counterparts, but come with the lingering potential of raising to a point where your monthly mortgage repayments may eventually fall outside of your predicted budget. This is why the security of a fixed-rate mortgage is so appealing to homeowners - particularly in these uncertain times.

As interest rates are on the rise, those who committed to variable-rate mortgages are likely to feel a pinch when it comes to their monthly repayments. 

Variable rates can often also be fairly unpredictable. There are certain economic factors that are likely to influence their rise or fall, however, unlike tracker mortgages they don’t strictly follow the Bank of England base rate, meaning lenders can use certain economic scenarios to increase them as they see fit. 

For example, if the Bank of England base rate rises by 1%, a lender may decide to:

• Increase its standard variable rate by 1%
• Increase its standard variable rate by more than 1% 
• Increase its standard variable rate by less than 1%
• Leave the rate unchanged 

The uncertainty is what drives many people to choose a fixed-rate mortgage, as it provides a guarantee that their mortgage payments will remain consistent, for a prolonged period of time. 

What does remortgaging involve?

Consider remortgaging as taking out a new mortgage for your existing property. With the right help and guidance, the process does not have to be difficult, but it might involve some extra fees and charges which you have to be prepared for. 

The most popular time to remortgage is when your fixed-rate term is coming to an end. This is when you are at risk of your monthly mortgage payments increasing, may the Bank of England base rate increase. 

You may be required to pay an early repayment charge if you are still in the initial discounted period of your mortgage. The amount you may be required to pay is highly dependent on the lender, your individual mortgage terms, and the lender you are with. 

You can remortgage independently by applying directly from the lender’s website, or simply get in touch with a broker who will be able to do all the research for you and find a deal that will be best suited for you. 

Remortgaging through a mortgage Broker, can also offer potential savings on your mortgage, as oftentimes they have access to deals that are not widely available to the public. You also get to benefit from their additional advice and guidance - from the initial application to the moment your remortgage has formally been confirmed. 

So… Can you save money through remortgaging?

The short answer is yes. It is possible to save money through remortgaging, particularly at times when interest rates across the country are rapidly increasing. In 2021, TSB has reported that the average homeowner could save up to a whopping £2000 a year through remortgaging. 

As the Bank of England base rate increased from 0.25 in December 2021 to a significantly larger 1% in May 2022, many people who are currently on the variable rate are watching the interest on their mortgage payments increase. 

These are the perfect candidates for remortgaging to a fixed-rate mortgage, which may help them save money in interest in the foreseeable future, while interest rates are still on the rise. 

If you are interested in remortgaging or wondering whether a remortgage may be right for you, contact one of our Mortgage Brokers who will be able to provide you with free mortgage and protection advice and help you decide on the next best course of action.