What Are My Remortgage Options?
Lee Gathercole and Neezam Romjon explain your remortgage options. [Podcast recorded in August 2023].
Podcast approved by The Openwork Partnership on 01/09/2023.
My mortgage deal is coming to an end. What should I do?
If you’re on a fixed rate, like most people, or a tracker with an initial rate, it will have a product expiry date. The first step is to know what that date is and start reviewing your options. You can do that as early as six months ahead.
If your mortgage is due to expire in August, we can get you a new deal as early as February. You’ll get an offer through from your existing lender around three months before your deal ends, but by starting six months before, you get the best opportunity of obtaining a good rate, especially as they can go up or down.
It just gives you time to consider your options alongside what your existing lender might offer you. It could be a difference of thousands of pounds over a mortgage term.
With banks typically allowing you to arrange a mortgage six months ahead, there can be big benefits – especially in the current climate with rates increasing fast. It puts you in a good position. If rates come down in those six months, you can change the product with the same bank or look with another lender.
Is now a good time to remortgage?
It depends on your situation and what you are looking to do. What’s your attitude to risk? Have you got a mortgage at the moment? Do you need to borrow more money? Are you looking to lock in a new deal when your current one ends? What’s your current rate?
We will look at all those things – and the market conditions will also impact whether now is a good time for you to re-mortgage. I tend to think that the market is the market. It’s something you can’t control. Some people by pure luck have locked into really low deals for five years when rates were ultra low.
If you’re asking yourself whether it’s a good time to remortgage, the best thing you can do is contact an advisor like us. We have lots of clients asking that question. We’ll start with a discovery call, get to know you a little bit and then answer your questions based on your specific situation.
How quickly can you remortgage?
It can take a matter of weeks to remortgage. You may have to provide some documents, and to secure a rate with a new lender there’s some legal work involved. There’s very little legal work if you’re just looking to change products with the same lender.
Each bank is very different in terms of how quickly they can move, but generally four to eight weeks is a typical scenario.
That’s why that six months comes in – ideally you need to look at your options six months ahead, but give yourself at least a couple of months as a minimum. That’s how long it would take to move to a new bank for a more cost effective deal.
It’s slightly different if you were staying with your bank – that’s essentially a click of a button. It’s the easy way, but not usually the most cost effective. It’s key to understand your options from both your existing lender and the wider market.
Can I remortgage before my deal ends?
You can. The majority of products and lenders will allow you to remortgage early, even if you’ve got two or three years left on a deal.
But you’ll need to find out from your existing lender what penalties you might face as a borrower. If you’re on a fixed rate with three years left, the lender will often charge you a fee that’s a percentage of the mortgage balance.
That might sway the decision as to what you do. If you are looking to remortgage before your deal ends, it’s often because you need to. Perhaps it’s a joint mortgage and you are separating from your partner. Or maybe you’re on a really high rate with a specialist lender and you now have access to more competitive deals.
We’ll help you weigh up whether it’s cost effective to do that, even with a penalty. If you’re on a variable rate mortgage like a tracker or a discount, a lot of lenders don’t charge penalties. You might have the flexibility to move even if your deal isn’t officially ending.
Do tread carefully, because if you get it wrong you can face thousands of pounds in early repayment charges. Always get advice. Speak to us and we’ll give you some guidance and advice on the best thing for you to do.
Can I move to a new rate when my current mortgage deal ends?
Absolutely and that is the big aim of remortgaging – to obtain a new rate. Don’t sit there and do nothing. Sadly, a small percentage of people don’t do anything and are paying more than they need to for their mortgage.
If you have been on a fixed rate for five years, when it ends you fall onto the lender’s ‘standard variable rate.’ It’s normally a much higher interest rate. You should only be on that rate if there’s specific reasons for you to do so.
The only benefit of the variable rate is it doesn’t have any tie-ins. So if you’re looking to move very soon you could stay on your variable rate.
Pick up the phone regardless of whether you think it’s a good time or not. Just get some advice. Understand what your options are and then move to a new rate when your current mortgage deal ends. That’s the goal.
Can I extend my mortgage term?
Potentially yes. Usually it will depend on passing affordability assessments with the lender you’re looking to extend the term with. Whether it’s your current lender or a new lender you can potentially apply for a longer term.
As long as you’re not exceeding the maximum age, lenders are usually happy to extend the term. Even if one lender isn’t happy to lend to age 70 or 75, another lender may well do. There are potentially different options from each lender.
Can I fix my mortgage with rates increasing? How long should I fix my mortgage?
We have to tread carefully on this and of course we get asked this a lot. Is there a magic answer? Is everyone going for a five year deal or two years?
But it’s not about what everyone’s going for. Every individual has a different set of circumstances and reasons why they should apply for a two year, five year or 10 year fixed mortgage.
The benefit of fixing your mortgages is peace of mind – but every client has different requirements. Sme might have plans to move, to upsize or downsize, so they might not want to be tied in as long. There isn’t a magic product that everyone is going for.
If you’re the type of person that is risk averse, and you really want to know what you’re paying then fixed mortgages may be right for you. In deciding how long to fix for, that’s when you really need to start thinking about your plans. How long do you want to be tied into a mortgage for? Do you have any plans to move? Everyone is different.
Speak To An Expert
Will mortgage rates go down in 2023?
I hope so Tessa. That’s all I can say – who knows? What we know right now in August 2023 is that interest rates have risen sharply – it’s one of the sharpest rises in the last 150 years for mortgage borrowers.
A lot of people are feeling that sharp rise. So I think we’re all hoping that rates do come back down again. Not necessarily to where they were, but I think we’ll see rates reduce at some point in the future. The question is how long will that be? No one really can answer that, because we’re waiting to see what inflation does and how the Bank of England reacts.
I wouldn’t base any advice on rates decreasing or when they would decrease. So for your next mortgage deal, it’s about looking at what your future plan is, your attitude to risk and exploring all the options. It also depends on your financial position.
You might only want to lock in for a shorter period and then have the option to review it again. There’s lots of different factors to it. If you’re getting advice, you can fully understand your options, the pros and cons for each and then you can make an informed decision as to what’s right for you.
Can I remortgage with credit card debts?
Yes, absolutely you can. This is known as debt consolidation, where you add the debt into your mortgage. It’s a possibility, but it’s not to be taken lightly.
Effectively you’re moving unsecured debt – loans, credit cards and things – onto your property. You’re securing it to your own home. You’re paying the debt over a longer period. Typically mortgages are 15, 20, or 25 years. A credit card debt could be repaid in a lot less time than that. You’re paying more interest over the term as well.
Obviously the big benefit is to help bring down your monthly outgoings. But it’s not to be taken lightly. You absolutely need mortgage advice from someone who is a specialist in remortgaging for debt consolidation. We will need to really understand why you’re doing it to see if it is going to be beneficial for you.
Can you remortgage a Help to Buy loan?
There are two options here. If you have a Help to Buy equity loan and you need to remortgage, you can either keep your equity loan and switch your mortgage borrowing onto a new deal; or you can explore the option to increase your mortgage debt and pay off the loan. We’ve helped clients with both.
It depends how much your property is worth and what equity you have in your home. Again, if you’re looking to increase your borrowing you need to pass affordability checks with the lender.
If you are looking to remortgage and keep the loan in the background, your options are more limited. If you’re paying it off, there’s a bit more legal work required and it is a more complex process – because you’re both remortgaging and managing the Help to Buy loan lender.
So there are options. It’s about weighing them up and understanding what’s right for you going forward. You need to consider whether you’re looking to move in the near future or to stay where you are long term – we can help you either way.
What else should we consider with our remortgage options?
There are a number of reasons why you remortgage. Most commonly it’s to find a new mortgage deal, because you don’t want to be paying more after your fixed rate ends.
You may want to raise some money for home improvements or pay off your Help to Buy loan. You may be on a tracker rate and you want to fix your mortgage.
If you’re thinking about a remortgage, start the process as early as possible and just understand your options through a mortgage broker.
Think carefully before securing other debts against your home.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up with your mortgage repayments.
Approved by The Openwork Partnership on 01/09/2023.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS