What you need to know about Remortgaging
Remortgaging can be a strategic financial move, whether you’re looking to secure a better interest rate, release equity, or consolidate debt. But how soon can you remortgage? This blog will guide you through the remortgaging process, key considerations, and tips for timing it right. With Kerr & Watson, you’ll get expert advice tailored to your unique circumstances.
What is Remortgaging?
Remortgaging is the process of switching your existing mortgage to a new deal with either the same or a different lender. It’s a common practice aimed at securing a better interest rate, reducing monthly payments, or accessing additional funds by releasing equity from your property for a variety of different uses.
When Can You Remortgage?
Generally, most lenders allow you to remortgage once you’ve been on your current deal for a certain period, typically six months. This means that from the date your name is registered on the title deeds, you have to wait at least six months before remortgaging. This is not the case with all lenders, with some allowing ‘day one remortgages’.
Day one remortgages are often used when a house has been bought with cash or a bridging loan (for instance, an auction purchase) or somebody has refurbished a property lifting the value.
Early Remortgaging
While the standard waiting period is six months, there are scenarios where you might want or need to remortgage earlier:
- Bought with Cash: If you purchased your property with cash and now need to access those funds.
- Debt Consolidation: If you’ve used high-interest credit to fund home improvements and want to consolidate this debt. Remortgaging for Debt Consolidation
- Property Improvements: If unexpected repairs or improvements are needed soon after purchasing.
- Inheritance: If you’ve inherited a property and wish to remortgage it.
In such cases, it’s possible to find lenders willing to consider an early remortgage.
Find out Your Options
Benefits of Remortgaging Early
Potentially Securing Better Rates
Market conditions fluctuate, and if interest rates are lower now than when you initially took out your mortgage, remortgaging can help you lock in a better rate, reducing your monthly payments and overall interest. Some lenders allow you to change products post-offer so you can hedge your bets by securing a product early and changing it, should rates drop.
Avoiding Higher Standard Variable Rates (SVR)
When your fixed or introductory mortgage rate ends, you typically move to your lender’s standard variable rate, which is often higher than the lender’s other products. Remortgaging before this happens can save you money.
Accessing Equity
If your property has increased in value, remortgaging can allow you to release some of this equity for other purposes, such as home improvements, investing, or consolidating debt.
Key Considerations Before Remortgaging
Early Repayment Charges (ERCs)
One of the main considerations is whether your current mortgage has early repayment charges. These are fees charged for repaying your mortgage before the end of the agreed term, designed to compensate the lender for lost interest. Not all products carry these but it is definitely worth exploring as most do. In this instance, speaking with a professional is recommended.
Loan-to-Value (LTV) Ratio
Your loan-to-value ratio is the percentage of your property’s value that you’re borrowing. A lower LTV typically means better mortgage deals. For example, if your property’s value has increased, your LTV decreases, potentially qualifying you for lower interest rates.
Credit Score
Your credit score plays a crucial role in determining the remortgage deals you can access. Improving your credit score before applying can open up more favourable options. It may be the case that your score was lower in the past and your current product reflects that, but since this time it has improved opening new products. You can view your credit file by going to CheckMyFile.
Financial Stability
Lenders will assess your financial situation, including income, outgoings, and existing debts. Ensuring your finances are in good order will improve your chances of securing a favourable remortgage deal.
Conclusion
Remortgaging can be a smart financial move, but timing is crucial. Whether you’re looking to secure a better rate, avoid moving to a higher SVR, or release equity, it’s essential to understand the best time to remortgage based on your individual circumstances.
At Kerr & Watson, we’re here to help. Our expert advisers can guide you through every step of the process, ensuring you make informed decisions that benefit your financial future.
