When’s The Right Time To Remortgage?
Have you decided now’s not the right time to move after all? You’re going to stay put. In that case, it could be an ideal time to review your current mortgage. Here I explain how the process of a remortgage works.
I CAN AFFORD MY MORTGAGE – WHY SHOULD I BOTHER CONSIDERING TO REMORTGAGE?
It’s a strange one really. You might be someone who shops around for insurance and utilities to save £20pm. But have you ever stopped to think about how these savings could be dwarfed by your biggest bill – your mortgage?
Banks rely on customers not shopping around and it’s not uncommon for there to be cheaper offers for you elsewhere. All you have to do is have a look at a price comparison website or contact a local mortgage broker to compare deals on your behalf if you haven’t got the time.
If you’ve had your mortgage a long time, then you could be on a low Bank of England tracker deal. You may even be paying less than 1%. If this explains your situation, you might be tempted to leave that mortgage where it is for now. However, your payments will increase when the base rate eventually goes up.
CAN I BORROW MORE MONEY FOR HOME IMPROVEMENTS?
Subject to the usual affordability checks and assuming you have got equity in your property then yes. It is possible to increase your mortgage for home improvements. This can be a good investment if you use the money wisely. Often, we see customers do this to facilitate building an extension or converting their loft.
CAN I BORROW MORE MONEY FOR OTHER REASONS?
You can borrow extra funds for most legal purposes, examples of this would be:
- Debt Consolidation
- Property Investment (e.g. into a Buy to Let)
- Consumer Purchases
- Gift to relative
Remember by increasing your mortgage you will end up paying back more interest, so you need to be sure you are doing this for the right reasons.
ISN’T IT A BAD IDEA TO ADD UNSECURED DEBT TO MY MORTGAGE?
You have to be aware that it can be a bad idea to add debt to your mortgage. This is because you will end up paying back more interest overall by essentially extending the term of your debts to make the payments lower.
You are also taking debt, which is not secured, and securing it on your home. This puts you at risk of repossession if you cannot keep up repayments. Consolidating debts that you can afford or credit cards that are at 0% interest will almost certainly be the wrong thing to do.
However, if you need to reduce your monthly outgoings to avoid missing payments, which could damage your credit rating, then it might be a viable option.
WILL MY CURRENT MORTGAGE PROVIDER OFFER ME A REMORTGAGE DEAL?
Often your current Lender will offer you a new deal to stay with them, they may call this a “Product Transfer” or “Retention” product. This isn’t guaranteed and sometimes you have to contact your provider directly to see what is available to you. Some lenders allow you to make a product switch online without taking advice or providing further information/documentation.
Just a couple of words of warning here.
Firstly, whilst it may be easier to stay with the same provider and switch products rather than put forward a new application to a different lender, you may find that you could save a lot of money by doing so.
Also, and most annoyingly of all, many Banks still offer preferential rates to new borrowers over existing ones. One day, Lenders will get their act together and realise that taking a more ethical approach would breed loyalty amongst their customers. Why should you be offered a worse deal than a new customer? Especially if you have proved yourself credit-worthy by keeping up your repayments.
Please note that the above remortgage information is for reference purposes only and is not to be viewed as personal financial or mortgage advice.
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