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10 considerations before remortgaging your home

If your current mortgage deal is coming to an end, it may be time to start thinking about remortgaging your home. Here’s what you need to know when remortgaging.

Remortgaging your home can be a great way to release equity from your home and secure a better mortgage deal.

Whether it’s a new bathroom in your semi-detached or a new wing to your stately home, remortgaging to make your home more attractive could add to the value of your property.

The other big reason to remortgage is to take advantage of the increasing choice that comes with a booming housing market. Mortgage lenders are offering a huge range of products, so there’s never been a better time to consider making a switch.

Read on to discover how remortgaging can benefit you and the key factors you should consider before switching providers or releasing equity in your home.

How does remortgaging your home work?

Remortgaging your home works by switching to a new mortgage on your existing home. There are two ways you can remortgage your home:

  1. Swap to a new mortgage deal for a lower loan-to-value rate.
  2. Borrow more money by increasing the balance of your mortgage.

You can remortgage with your existing provider or take out a new mortgage rate with a different lender. Read our guide to the remortgaging process for more information.

Top considerations to make before remortgaging

Whether you’re looking to increase your borrowing with your current lender, or to switch to another mortgage company with a better deal, here are our top ten considerations to make before remortgaging your home.

1. Decide whether to improve or move

Liberating cash to invest in home improvements can be a great idea, but it’s best to figure out your future plans first. If you are investing in your home to increase its value for selling, do your homework before you apply to make sure it’s financially beneficial.

Get reliable estimates for everything, including architect’s plans and building regulations inspections, and draw up a realistic budget. You should also estimate how much these renovations could improve the value of your home against what you plan to spend on them.

2. Find out the true value of your home

Many of us get regular updates from property sites showing the value of our homes shooting up. But remember that these are average estimated figures. Don’t assume that your lender will offer you up to the value of these new estimates - they will take their own valuation.

Instead, you can organise your own valuation. Ask one or two estate agents to value your home as it stands, and the potential value after you have added an extension or home improvement. If your home is worth more now than when you originally took out your mortgage, you may be able to remortgage at a lower loan-to-value rate.

3. See if it does pay to switch

If you’re thinking of switching to a new mortgage, keep an eye out for the expiry date on your fixed term mortgage, if you have one. If you don’t switch before that happens, you’re likely to be put onto the lender’s Standard Variable Rate (SVR) – which may not be the most competitive option.

We recommend looking for a new rate around three to four months before your deal ends, so you can get the best deal and avoid paying SVR. Take a look at our five reasons why remortgaging could save you money for more advice.

4. Compare what’s out there

The mortgage world is a bewildering jungle of different products, so before you pick a new provider, have a look through one of the comparison sites.

It may be tempting to stay with your current lender to save yourself time and effort shopping around. However, studies show 60% of UK lenders charge their existing customers higher rates than those switching from a different lender. So, you could save hundreds of pounds a year just by switching providers.

5. Work out the exit fees

Before changing mortgage providers, you’ll need to look carefully at your existing lender’s exit fees and any other charges that may apply. There’s no such thing as a free mortgage switch – but it may still be the most advantageous option.

The easiest way to work out if switching providers will save you money is to calculate how much you’ll save in interest over the course of your new loan terms minus any set up fees, against what you’ll pay in exit fees now.

6. Ask first

Staying with your existing provider but choosing a different mortgage from them may work out to be the best and easiest option. This means you’ll avoid being placed on a Standard Variable Rate (SVR) and you may also save on potential charges for leaving your current lender.

However, you should still shop around to make sure staying put is the best option.

7. Consider the application fees

As well as paying to leave your current mortgage, there is also likely to be a cost involved in applying for a new one – and sometimes these vary based on the value of your home. There are some fee-free mortgage deals, but they are likely to have higher interest rates.

Make a list of all the costs associated with switching deals and weigh it against what you will save on your monthly repayments. This should give you an idea of whether it’s worth remortgaging now, or if you should wait a little longer.

8. Dedicate time to your remortgage

Set aside some time to properly research and compare your options for remortgaging ahead of your current deal ending. This will just help ensure you are getting the best deal possible.

If this means switching providers, be prepared to spend a lot of time on the phone too – there will be lots to sort out and you’ll be dealing with two lenders. In some ways, switching mortgages is more complex than arranging one in the first place, but just keep thinking about the money you’ll save in the long run.

9. Make sure any additional products offered are right for you

When you’re approaching lenders about remortgaging, they may try to sell you all kinds of products, from payment protection to buildings insurance. This is usually to help the lender make money elsewhere, especially if they are offering you competitive rates or loan terms.

All of these are available (and possibly cheaper) from other suppliers and you don’t have to buy one linked to your mortgage. Make sure you get the right products for your requirements.

10. Consider all the implications of remortgaging to repay debts

Remortgaging to pay off debts may seem like a good option, as the interest rates offered are usually lower than other types of loans. But be warned – a mortgage is still a loan, albeit over a longer term.

Consolidating your debts into one single, monthly payment can make them easier to manage and potentially more affordable. However, repaying debt in this way can sometimes take longer and can sometimes cost more in the long run if you extend the term of your existing debts. So, make sure you consider all the implications of this first and that it is the right thing for you to do.

You should also note that you could be securing previously unsecured debts against your home, and you may also want to consider other ways of repaying your debts.

Remortgaging can be highly beneficial in saving you money or achieving your home renovation dreams. However, like with any loan, it’s always best to consider all your options and work out the overall costs of switching before taking the plunge. For more advice, take a look at our guide on everything you need to know before remortgaging.


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