Is Remortgaging a Good Idea?
Remortgaging can be a really good way to save money on your monthly mortgage repayments, but there are times it’s not always worth it in the long run. Fundamentally, it involves switching your current mortgage to a new provider, usually whoever is providing the best deal overall at the time.
Mortgages will often have a time-limited rate that lasts two, three, five or even ten years and beyond at the start of the deal. But once this runs, you often end up on a lender’s standard variable rate which generally means paying a much higher interest rate and leaving you with fewer pounds in your pocket.
So, remortgaging to a new deal with a new provider could mean getting another product and saving you some money. You could even look to try and pay the mortgage quicker at the same time and save interest in the long run.
Remortgaging is often one of the best tools to avoid having to pay more than you should. It may not always be right for everyone, because banks can charge you various fees to leave your current deal. Also, once you subtract it from the savings you’d make, you could find yourself saving nothing at all. That being said, if staying put is the right thing for you, that’s what we will advise you to do. In fact, very often, we can put a rate switch request for you, safe in the knowledge that you have done the right thing.
On the other hand, it can be a huge money saver, often with potential savings running into thousands of pounds over the duration of your deal between different lenders. This is exactly what a mortgage broker will check for you. The worst thing you can do is bury your head in the sand or just stick with the same lender because you’ve always been there.
Find out your options first or else you could be throwing money down the drain each month, which could be better spent on you and your family. It costs nothing to at least have a chat with a Peak Advisor and find out your options.
What is the Cost of Remortgaging?
There can be some costs you will have to pay when you look to remortgage. Therefore, you need to assess whether it will be cheaper in the long run to remortgage. Your mortgage adviser will explain whether this is sensible and whether a rate switch with your existing provider would be more suitable.
Here is a list of the charges you may have to have to pay in order to remortgage:
Early Repayment Charge
If you are on a time-defined deal such as a 2-year fix or a 2-year tracker, most mortgage lenders will include an early repayment charge which will tie you into the deal. Remortgaging means paying off, due to the fact that you have a new mortgage to pay off your old one. So, if you are tied in, we will need to take note of this.
That being said, most remortgage offers last for 6 months so we have a window to get everything ready well in advance and simply arrange for the remortgage to actually complete once your tie-in period ends and eliminate the early redemption charge. This is why we generally advise people to start to look at remortgages 6 months in advance.
Sometimes it can be advisable to pay your repayment charge early if it saves money in the long run. Consider the number of years left on your deal, the cost of the monthly mortgage repayments on your new plan versus the old one, and the cost of the early repayment charge. If over the remainder of your deal you calculate that you are likely to pay less, even if you take a hit on the early repayment penalty, then it could be worth it. Again, your adviser will be able to work this out for you and give a straight answer.
Valuation Fees when Remortgaging
Just like with your original mortgage, you might need to pay a valuation fee, as your new provider offering the remortgage may want to check that the house is worth what you say it is. However, this is more likely to be a basic mortgage valuation check and in fact, the vast majority of residential mortgage providers do this for free.
You will also need the legal fees taken care of with a remortgage, just as you would have done when you bought your house. A conveyancer will need to transfer funds and redeem your old mortgage and update the land registry with your new lender’s details for example.
These costs can look expensive and could make you think twice about remortgaging. But it may still save you money overall to take the hit. It’s also worth noting that the cost will generally be a lot less than when you buy a property as there is less work involved for the solicitor. However, lenders will often provide free basic legal aid so as to eliminate the cost or even cashback so that you can put this towards the cost of your conveyancing.
So is it Worth it?
Well, that’s where we come in as we’ll tell you. After all, we’re here to help you buy your home, keep your home and protect your family. If it’s right and will save you money in the long run, absolutely. If it isn’t and the best bet is to wait or stay with your existing lender we’ll tell you. Get in touch with us today!