Interest rates on mortgages are higher than they've been for a very very long time. So if you’re looking to change your current mortgage, whether that’s because you’re moving to a new house (exciting times!) and need a new mortgage, or your current mortgage rate is coming to the end if it’s a fixed deal, then getting it right is more important than ever.
We’ve put together this handy guide to help you understand remortgaging.
Not got a mortgage yet and want to understand more? Check out our blog explaining how
First step – understand why you are remortgaging
The first question to ask yourself is, why are you remortgaging, and will it save you money?
There are many reasons why you might want to remortgage, but some reasons could include:
To save money, for example, if you’re currently on a variable rate and want to move to a fixed rate (who doesn’t want to save money in the current climate?!)
Your current deal is coming to an end and you need to find a new one
You need to borrow more and your current lender doesn’t allow this
You’re moving house and the current lender won’t move your mortgage to the new property
While remortgaging can sometimes help save you money, that’s not always the case and it won’t always be the answer for everyone. Some reasons why remortgaging isn’t for you could be:
You’re currently on a good deal and remortgaging could put you on a worse one (very relevant right now as new mortgage deals are on higher rates than many older ones)
Remortgaging could lead to expensive early repayment fees
You currently have a bad credit score
Next step – get prepared
Before you go ahead with looking for a new mortgage, you’ll need to confirm a few things:
Will remortgaging cause you to pay an early repayment charge or exit fee? If you’re leaving a fixed deal early this could very likely be the case
What is your credit score looking like? Get it in good shape before applying for another mortgage. A bad credit score doesn’t mean no mortgage, but it does make things more difficult
Make sure you’ve paid all your bills (and on time), avoid dipping into your overdraft, try and pay off any existing debt, and (this is a weird one) register to vote!
How much do you currently owe on your existing mortgage? If you’re not sure you can get this from your current lender
Can you afford the new repayments? Compile proof of income such as payslips and create a budget so you know exactly how much you can afford.
Your income matters, but so does your employment status and how long you’ve been in your current job. So, if you’re thinking of leaving your role while applying for a mortgage, maybe wait until you’ve secured your mortgage.
Don’t forget to also factor in other costs when thinking about remortgaging, as there are likely to be fees for the new mortgage, such as arrangement fees, legal fees, or valuation fees.
Final step – speak to a mortgage adviser
So you’ve been through the steps above and you’ve decided remortgaging is definitely the best course of action for you. We’d always recommend speaking to a mortgage adviser, their services are often free and they have access to the best deals on the market.
It could also be worth asking your current lender what rate they are offering.
Lastly, when you get a mortgage, your mortgage adviser or provider will talk to you about home insurance and protection. A financial product we think everyone should consider is income protection insurance, which basically replaces your income if you can’t work due to illness or an accident, for as long as you need. So worst case scenario, if you’re unable to keep up with your mortgage payments, because you can’t work, income protection insurance could help. It's a product that saves you from having to dip into your hard-earned savings.
Conclusion
Hats off to you, you’re really getting into this adulting thing if you’re looking at remortgaging! Home buying is a big achievement and an amazing milestone and we'd always recommend getting help from an expert. A good mortgage adviser will help you find the right remortgage deal, support you through the whole process and make sure you have all the right insurances in place too!