Remortgaging is a financial strategy that involves switching your current mortgage to a new lender or a new mortgage deal with your existing lender. This process can be an effective way to save money, access better interest rates, or release equity from your property.
However, remortgaging isn’t something you can do too frequently, and there are certain considerations to keep in mind. In this article, we will explore how often you can remortgage, along with other common questions related to remortgaging.
How Soon Can You Remortgage?
The frequency of remortgaging depends on various factors, including your current mortgage terms, early repayment charges and the specific lender’s policies. Generally, you can consider remortgaging after the initial fixed-rate or introductory period ends. This period typically lasts for two to five years, during which you enjoy a discounted or fixed interest rate.
After this period, you’re likely to be transferred to the lender’s Standard Variable Rate (SVR), which is often higher. At this point, remortgaging becomes a viable option to secure a more competitive deal and avoid paying a higher interest rate on the SVR.
What Factors Affect How Frequently You Can Remortgage?
Several factors influence how often you can remortgage:
- Equity in Your Property – The amount of equity you have in your property can impact your remortgage options. Having more equity usually opens up access to better rates and deals.
- Credit Score – Your credit score plays a crucial role in mortgage applications. A good credit score increases your chances of being approved for remortgaging and securing favourable terms. Remortgaging with bad credit could still be an option.
- Financial Situation – Your financial situation, including your income, expenses and overall financial health, will be considered by lenders during the remortgaging process.
- Lender’s Policies – Different lenders have varying policies regarding remortgaging frequency. Some may have restrictions on how soon you can remortgage with them again.
Can I Remortgage Early?
While remortgaging after the initial period is common, remortgaging before the end of your current deal is possible but comes with some considerations. If you decide to remortgage early, you may encounter early repayment charges (ERCs) from your current lender. ERCs are typically levied when you pay off your mortgage before a specific period, usually during the fixed-rate or discounted period.
Before remortgaging early, calculate the potential savings from the new deal against the ERCs and other costs associated with remortgaging. In some cases, the savings from a better deal might outweigh the early repayment charges, making early remortgaging a worthwhile option. However, it’s essential to review your current mortgage terms and seek advice from a mortgage advisor to make an informed decision.
What Are The Advantages of Remortgaging?
Remortgaging offers several advantages, including:
- Lower Monthly Payments – By remortgaging to a lower interest rate or a more favourable deal, you can reduce your monthly mortgage payments.
- Fixed-Rate Security – Opting for a fixed-rate mortgage can provide peace of mind, knowing that your interest rate won’t fluctuate during the fixed period.
- Access to Equity – If your property’s value has increased since your last mortgage deal, remortgaging can allow you to release equity for some of your other financial needs.
- Debt Consolidation – Remortgaging can be a way to consolidate higher-interest debts, such as credit card balances, into a single, more manageable monthly payment.
When Should You Consider Remortgaging?
Apart from the end of your initial fixed-rate period, there are several situations in which you should consider remortgaging. First and foremost, changing financial circumstances can be a compelling reason to explore remortgage options. If your financial situation has improved since you took out your mortgage, such as increased income or an improved credit score, you may now qualify for better rates and terms.
Another significant factor to consider is changing interest rates. When interest rates in the market drop significantly, remortgaging to a lower rate can lead to substantial savings over the life of your mortgage. This can be especially advantageous if the difference between your current rate and the new rate is significant.
If you’ve made significant home improvements that have increased the value of your property, remortgaging can allow you to access the increased equity. This increased equity can be particularly useful if you are planning on undertaking further home improvements or need funds for other financial needs.
Additionally, it is essential to pay attention to the expiration of your fixed-rate period. As this period approaches its end, it’s crucial to start exploring remortgage options to avoid being automatically switched to the lender’s Standard Variable Rate (SVR). The SVR is typically higher than fixed-rate deals, and you could end up paying more in interest.
Key Steps To The Remortgaging Process
The remortgaging process involves several steps:
- Assess Your Current Mortgage – Review your current mortgage terms, interest rate and outstanding balance. Take note of any ERCs that may apply if you remortgage early.
- Shop for Better Deals – Research and compare mortgage deals from different lenders to find one that best suits your financial needs and goals.
- Seek Professional Advice – Consult with a mortgage advisor to explore your remortgaging options, understand associated costs and ensure the new deal aligns with your financial objectives.
- Gather Necessary Documents – Prepare the required documentation for the remortgage application, including proof of income, identification and property valuation reports.
- Apply for the Remortgage – Submit your remortgage application to the chosen lender and await their decision.
- Complete the Legal Process – If your remortgage application is approved, your solicitor will handle the legal process, which involves transferring the mortgage from the old lender to the new one.
- Pay Off Your Current Mortgage – The new lender will use the funds from the remortgage to pay off your current mortgage with the previous lender.
Concluding Thoughts
Remortgaging can be a valuable financial tool, providing opportunities to save money, access better terms and release equity from your property. While the frequency of remortgaging is influenced by various factors, homeowners can typically consider remortgaging after their initial fixed-rate period ends. Early remortgaging is possible but may come with early repayment charges, so it is essential to weigh the potential savings against associated costs.
The decision to remortgage should be based on careful consideration of your financial situation, equity in your property and credit score. By making informed decisions and exploring remortgage options that align with your financial goals, you can potentially secure a more favourable mortgage deal and improve your overall financial outlook. Remember that remortgaging is a significant financial decision, and professional advice is essential to ensure you make the right choice for your individual circumstances.
