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Is now the right time to remortgage?

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Interest rates are at an all time low having been slashed by the Bank of England in response to the coronavirus pandemic. Many homeowners are wondering if this is the right time to remortgage and seize the opportunity for savings. 

Why should I remortgage?

A mortgage will typically be the biggest financial commitment for most people.  Streamlining this debt can help to create significant savings, sometimes even £1000s per year.  If you would normally shop around on other financial products to get the best deal, such as car insurance, broadband or utilities then it makes sense to use the same skills to save money on the largest debt you have.

The current Bank of England base rate is just 0.1% – currently the lowest it has been in several years.  This means that mortgage rates, both fixed deals and those that follow the base rate have dropped significantly. Many providers offering great deals for both homeowners and first-time buyers.

What should I be looking out for?

Remortgaging should not be rushed into – you need to make sure that moving onto another deal is going to benefit you in the long term.  Here are a few things to think about:

Are you locked into a fixed rate deal?

Most people think about remortgaging when they know that their current deal is coming to an end.  However, a great deal may have caught your eye at a different time.  Does this mean that you cannot switch?

Well yes you can, but you will need to get out the calculator first!  If you are on a fixed rate deal which lasts for a certain period of time, you’ll need to read your terms and conditions to find out what your early redemption charges will be.  This is an exit fee that you will need to pay to your mortgage provider to end the contract early (it ensures the provider does not suffer from any lost interest).   If you are in the early stages of the deal, these fees can be hefty.  Typically, the fee will reduce each year.   If the savings you make by remortgaging are larger than the exit fee (and then some) then it is certainly worth considering the switch. 

Have your circumstances changed?

2020 has been a terrible year for the economy, and thus people’s livelihoods.  We started with uncertainties about Brexit (which are set to continue in the new year). We then found ourselves amid a full-blown pandemic.  Lots of people have been left with a reduced income due to the furlough scheme or in some cases have been made redundant.

Thankfully mortgage providers have had sympathy for this situation, offering borrowers extended mortgage holidays, deferring payments for up to six months in some cases.

However, if you are currently looking to remortgage then any changes in your situation could have an impact.  Just as you had to provide evidence for your first mortgage, lenders will expect proof of earnings as well as a guarantee that future payments will be made in full, and on time.    Affordability is key when it comes to securing a good remortgage deal so make sure you have all your paperwork to be able to prove this.

Has your credit rating been affected?

Coronavirus has hit many people hard.  With reduced income and a lot on your mind, it can be all too easy to miss a credit payment here or there.  Unfortunately, each time that this happens, it leaves a footprint on your credit score.    Too many of these marks will show up as a red flag to a lender.

If you know that you are due to remortgage soon, then it is certainly worth checking your credit score online.  You can rebuild your credit score which will give you a better chance of securing your remortgage deal.

How do I remortgage?

You can speak to your own mortgage provider to see if they can move you onto a better rate.  However, you will often find that the biggest savings by switching to a different provider, though you may have to allow for additional fees and charges such as valuation, conveyancing and application fees.   

Using a whole-of-market mortgage broker will cut down on some of the leg work on your part.  They will search all current deals thoroughly and ensure they are matched to your circumstances and budget. 

So Smart Money are mortgage experts – speak to an adviser today to see if you can find a great deal on your mortgage.  

The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.


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