We all want to have the opportunity to save a lot of money without having to sacrifice anything. And the way that many homeowners are doing this is by remortgaging their homes. But how much are they really saving? A recent LMS report revealed that up to £500 was saved by 32% of homeowners when they remortaged.
Indeed, remortgaging is proving to be very popular, thanks to the resultant record low rates of fierce lender competition. Add to this an increase in housing equity, and the conditions are ideal. However, can remortgaging always get you a better borrowing deal? That depends on your individual situation.
Is Remortgaging for You?
There are lots of great reasons for paying off your existing mortgage and switching to another, but the costs of doing this must be carefully considered. As well, there are several steps to take before you start hunting for a lower rate.
Look at your Reasons
As stated previously, the desire to save money is a good reason to remortgage, as long as the benefits outweigh the costs. Staying with your current deal could cause you to miss out on better ones which could slash the cost of your monthly payment.
Remortgaging can also be of benefit if you need to make improvements to your home or need some cash, as it will release some of your home’s equity.
Those who want to pay off their mortgage sooner may also choose to take the remortgaging route, as it allows for the term of the mortgage to be reduced, freeing you from debt that much sooner.
Finally, remortgaging makes sense if something has changed with your financial situation. Some events which could be considered as a financial change could be the starting of a new job, having children or a similar significant life event. In these situations, remortgaging can provide the peace of mind of a no-surprises fixed rate.
The Costs of Remortgaging
Although remortgaging can appear to be a great deal at the outset, an important thing to think about are the fees. And so when considering this route, all charges spanning the length of the deal and your monthly repayments should be added up.
There are several other fees associated with remortgaging that need to be considered. Some of these are the valuation fee, mortgage account fee, and exit fee. Depending on the value of your property, the value fee can range from between £150 and £1500. The mortgage account fee is what pays your lender for the administration costs they incur during the process of remortgaging your home. This cost will fall between £100 and £300. The exit or closure fee is what is paid to your lender upon the repayment of your mortgage. Unless you’ve already paid the mortgage account fee, your exit fee will fall between £75 and £300.
There are 8 additional charges which could potentially apply to your remortgage, adding up to a possible £3000. The final cost is dependent on which fees and what amounts apply to your particular situation.
Has your property’s value changed? This is a crucial piece of information to have because the higher the value of your property to your existing mortgage, the better the deals that may be available to you. There are numerous sources online where you can check the value of your property, such as Zoopla and Rightmove.
What’s Available on the Market, and Calling an Expert
Looking at the current market and putting your current payment amount against what you could be paying is a good way to see what kinds of deals are available to you. Once you’ve found your ideal rates, you may be able to get a good deal from a mortgage broker, who can access mortgage rates not offered on comparison resource sites. They can also assist with lending a pair of eyes to your calculations and helping you ensure you’re making the best financial choice for you.
Because every homeowner’s situation is so different, the only way to tell if a remortgage is right for you is to crunch the numbers. If the benefits of switching to a different deal outweigh the associated costs, then remortgaging could definitely be in the cards for you.