By Chris Blackwell, co-director of independent Swindon-based mortgage broker TED Mortgages.
Chris and his colleagues specialise in helping people find the right mortgage deal for their personal circumstances to allow them get on the housing ladder, move up or downsize. They also encourage everyone to reassess their mortgages on a regular basis even if they do not intend to move home.
The value of regularly reviewing your mortgage is often underestimated and every year thousands of pounds of potential savings are left on the table by UK households who do not take the time to consider making a change when they are not planning on moving home.
The term remortgage is, in fact, quite broad and can mean different things to different people.
We feel the best explanation is that a remortgage is "an opportunity to review your finances in full and ensure they are working in the best way then can for you" - and it does not always mean you want to move house.
Now could be a fantastic time to look at re-mortgaging because interest rates are so low. However it is important to ask the right questions, which could include: when does your fixed rate end? Are there any early repayment charges or fees?
We have come up with five things which may help you consider if a re-mortgage is right for you.
1. Standard variable rates: Some householders do not realise when their initial rate period finishes they do not have to simply revert to their lender's standard variable rate. Currently a typical variable rate for most high street lenders is around 3.5 per cent. When your initial rate period finishes you can take a new deal with your existing lender or change to a new lender if a better deal is available.
2. Competitive rates: the rates available in the current market are at an all-time low. The deals available in September 2020 are very different to those available now. For example, for someone with 25 per cent equity/deposit fixing for five years, the lowest rate available to them in September 2020 would have been 1.63 per cent. This compared with 0.99 per cent in September 2021. This represents a sizable monthly saving on household budgets.
3. Financial review: reviewing your mortgage is not just about getting a new deal. It is an opportunity to review your finances as a whole. This could include tidying up any high interest debts or trying to reduce the number of years on your overall mortgage. Your earnings may be higher and you may be in a position to invest more in your property. After all, who would not want to try and repay their mortgage quicker?
4. Releasing equity: property values have increased significantly in the past 12 months. This means that the amount of equity available in your home could have increased and be available for you to borrow against your home if needed. This could be used for home improvements, buying investment properties, consolidating debts and more. We strongly advise taking professional advice around this.
5. Things change: it is very easy to overlook the fact that our lives change, sometimes slowly over time, sometimes quickly through personal events. What was once the best thing for you may no longer be now. A change in circumstance can mean a change in mortgage. For most people a mortgage is their largest outgoing and therefore if this is not set up in the best way possible, it will have a negative impact on your overall financial position.
And finally please remember: a mortgage is a loan secured against your home. your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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