Switching your mortgage doesn't have to be scary...

Posted on October 21, 2019

When you sign a mortgage agreement and move into your new home, you aren’t locked into the same rate for the entire repayment period.

Mortgages usually have a period of 2–5 years where you benefit from a lower interest rate, but once this expires, most providers will switch you to their standard variable rate (SVR). The problem is, the SVR tends to be much higher than the rate you were previously on, so you will end up paying more each month.

You can avoid this price hike by remortgaging and switching to a better deal.

A remortgage involves paying off an existing mortgage with the money from a new mortgage. It is also known as re-financing.

For many borrowers, it is also the ideal opportunity to review their personal and financial circumstances and to consider whether their current mortgage and lender is the most suitable for them.

Let’s take a look at some of the reasons to remortgage:

  • Save money by moving on to a lower rate. With so many new products and offers available in the market nowadays, an increasing number of homeowners are looking at their options and discovering that remortgaging could generate substantial savings.
  • You Want to Borrow More Money - Maybe you are looking to fund some home improvements or buy a new car. If so, remortgaging can be a great way in order to raise the money. However, before increasing your debt further, it is essential that you seek professional advice together with doing your own research.
  • Your house value has risen - If your home is worth a lot more than it was when you first purchased and took out a mortgage on it, then you might find you can remortgage in a lower loan-to-value band. Loan-to-value is the ratio of a loan to the value of an asset purchased. To work out yours, divide your outstanding mortgage amount by your property’s current value, and then multiply this result by 100.
  • Adjust the remaining term - If your financial circumstances are different from when you first took out the mortgage, you may wish to increase or reduce monthly repayments to decrease or extend the years left on the mortgage.
  • You want to switch from an interest-only deal - Though they are more difficult to secure than before the 2008 financial crash, some lenders still offer interest-only mortgages that only require you to pay the interest on your loan each month, rather than loan repayments plus interest. If you’ve taken out one of these mortgages or have one from before 2008, you may reach a point where you want to switch over to a repayment mortgage instead.

As mentioned above, if your current mortgage deal’s introductory period is coming to an end, then it’s a good idea to remortgage before you are automatically transferred onto your lender's Standard Variable Rate, which can cost you considerably more money each month.

Example:

Based on a 75% LTV (loan-to-value) on a £250,000 house over 25 years, your monthly repayment would be £1067 on an SVR of 4.74%

By switching to a more competitive rate of 2.2% on a 5-year fixed rate, you could benefit from a more competitive monthly repayment of £814 per month.

This would save you almost £253 a month by remortgaging to a more competitive deal (that’s £3036 over 12 months).

When you can remortgage your house?

Choosing the right time to remortgage is a very important decision. Getting a better deal can often save a lot of money in the years to come.

It’s best to start looking around three months before your current deal comes to an end, to give you plenty of time to find a product and arrange a remortgage. If you don’t know your date, check your agreement or contact your provider as soon as possible.

It’s always best to take financial advice before making such a big commitment. Here at Mortgage Solutions Belfast, we can help you to identify when is the best time to go ahead if you are considering a switch in the future. Our remortgage advice team can talk you through the process, taking into account your personal circumstances and goals, then help you get the ball rolling when the moment comes.

We can provide you with tailored financial advice, as well as helping you get your application in order. Not only that, but we have a deep knowledge and experience of the market and can arrange deals not available to other consumers.

Mortgage Solutions Belfast have helped many people get a better deal on their home, and we’d like to help you too.

Call us today or send us a message on our social media!