It is common for new home owners to choose a mortgage that has a fixed rate for the first couple of years and to take advantage of stability in payments as they get on the property ladder. The trouble that many people face is that once this initial fixed rate period comes to an end, the mortgage lender will usually put you on a standard variable rate of interest (SVR).
SVR Mortgages can sometimes mean that you pay more than you need to towards your monthly payments and your lender can increase your interest rates regardless of the changing base rates. The good news is that you can often choose to leave an SVR mortgage to get a better rate from your existing lender or elsewhere, as you are not typically tied into this type of mortgage after your fixed rate term has ended. You should, however, be cautious about any early repayment fees and make sure you check the terms of your current mortgage before swapping. Be sure to do your homework and speak to a mortgage adviser at least six months before the end of your fixed rate period to know your options and to ensure you are getting the most out of your decision to change mortgages.
What does it mean to remortgage?
Remortgaging is when you leave your current mortgage lender and borrow from a different lender. Sometimes, homeowners choose to do this in order to receive a more competitive interest rate and lower their monthly repayments. Some people also choose to remortgage for a number of other reasons, including:
- To protect yourself against future interest rate increases
- To take advantage of an offset mortgage to make your savings work harder
- To raise capital for making home improvements
What are the cost advantages of a remortgage?
If you are currently paying a higher interest rate for your SVR mortgage, because your fixed rate has now ended, or you were previously unable to secure a low interest mortgage, you may be eligible for a new mortgage deal in order to save money on your monthly repayments.
Not everyone needs to remortgage to save money on their mortgage payments. Many lenders now offer existing customers competitive rates to stay at the end of the current rate, however, it does pay to shop around and check that your lender is offering the most competitive rate available to you. Some lenders will even allow you to swap rates earlier than the end of your fixed rate period, however, you need to check the exact details and should be guided by a mortgage adviser like Choice.
What should I look out for when doing my remortgage?
You should ensure that you are not currently tied into your mortgage deal (such as a fixed rate interest period) and that you are able to change deals. You should also check for any early repayment charges which lenders may have included in their terms that last longer than your fixed rate period. Although not common practice to have extended early repayment charges, some lenders do this to avoid borrowers leaving deals early and to hold onto some of the future interest payments that they are likely to miss out on when a borrower decides to leave for a better deal. When you are on a SVR mortgage, there should not be a lock in period and therefore no early repayment fee but always best to check with your lender or ask your mortgage adviser to help you find out. Many loans will have an administration fee to redeem the loan and this should also be taken into consideration.
You should shop around for the best mortgage deal to make the changeover worth it. A mortgage adviser, like Choice, can help you do this and ensure that you are moving onto the correct mortgage to suit your needs and circumstances. Remember that mortgage specialists often have access to deals and rates that you may not be able to find elsewhere, so always worth speaking to a specialist to get professional advice and compare prices.
Get in touch with Choice Mortgage Solutions
The teams at Choice Mortgage Solutions can help you identify the best course of action for your remortgaging plans and help you save time and money. Whether you are looking to release equity in your home to make home improvements, or if you are unsure about your options and want to shop around for a competitive interest rate – we can help. Call us on 0800 612 8099, or visit our website contact page to send us a message or request a call back.