Interest rates are low at the moment so a lot of people are deciding to remortgage their homes. Now is the best time if you’re going to do it but if you’re thinking about it, you need to consider why you’re doing it and whether that’s the best reason. You also need to be aware of some of the potential problems with remortgaging. If you’re considering it, this article will help you decide if now is the right time and help you to make the process run smoothly.
There are a couple of good reasons for remortgaging, and some reasons you shouldn’t borrow money that you should consider; the main reason that people decide to do it is that their current deal is going to end. Most mortgage deals are on a fixed rate term that lasts a couple of years before the interest rates increase. If your fixed rate deal is about to end and you can get a better interest rate by remortgaging, you could save yourself a lot of money on your monthly repayments.
Interest rates are also based on the value of the home, the more it’s worth, the less you’ll pay. If the value of your home has increased significantly since you first took out the mortgage, you could reduce the amount you’re paying by remortgaging. The two main reasons for an increase in value are any additions you’ve made to the house yourself or the area that the house is in becoming more popular.
The other major reason that people decide to remortgage is that they want to pay higher monthly payments and clear their mortgage quicker but their current deal won’t allow that. If you’ve got a new job or a pay rise and you can afford to clear the mortgage quicker it might be worth remortgaging and get a new deal that allows you to do that.
Those are the right reasons to remortgage so if one of those situations applies to you, you need to be aware of some of the issues you’ll face.
While you’re going to make savings on your interest payments, you’re going to have to spend a chunk of money on the fees involved with remortgaging. They can get a little confusing so it’s worth getting a cheap conveyancing solicitor to go over that paperwork and help you understand exactly what you’ll be paying. In some cases, they can also help you to negotiate reduced fees. Most of the time, it’s worth paying the fees because you’ll be making extra savings but if you’re not in a financial position to afford them, remortgaging might not be the best choice at the moment.
Early Repayment Charge
This is the thing that catches people out the most. If you’re on a fixed rate deal, most of them will charge you an early repayment charge to get out of the existing mortgage and take out a new one. Those charges can be pretty hefty and it might not be affordable so it’s always worth checking with your current provider and working out how much the remortgage is actually going to cost and how many years it’ll be before you start seeing real savings from the new interest rate.
It’s a good time to remortgage right now but make sure you’re doing it for the right reasons and you’re aware of some of the pitfalls.