Remortgage

Guide for Remortgage

Discount period

All mortgages will begin with some sort of discount, which will be fixed over time. If you change your mortgage during this time period, you will be charged a penalty, which is usually based on a percentage of the mortgage loan. When the discount period expires, the mortgage will most likely switch to a standard variable rate (SVR), and penalty charges will cease (normally). The SVR will most likely be higher than if you sign up for another discount product.

Should I remortgage

The size of the debt for Repayment Mortgages will decrease over time. At the same time, historically, property values rise over time. This has the effect of lowering your Loan to Value (LV). The lower your LV, the more market options you will have and the better rates you will be offered (all else being equal). The best rates are for LVs of 60% or less. A standard value rate will not reflect your improved financial situation.

Many people require the security of knowing that they have a set amount of money going out each month to pay for their mortgage. Once on the SVR, the amount can fluctuate from month to month and is usually linked to the Bank of England base rate. Remortgaging for a new fixed-rate mortgage can restore that certainty over monthly outgoings.

You have the option to play the market a little more if you have enough headroom in your disposable income. A discounted variable rate will be lower than a fixed rate for the same period when remortgaging. The risk is that if the Bank of England base rate rises, your monthly payments will rise, and vice versa. Nothing in life is certain, as the financial crash and then COVID has demonstrated. I believe it is safe to say, however, that as the Bank of England's base rate sits close to zero, there is very little room for it to fall.

How to remortgage

Obviously, get in touch with me.

This is where we divide into different groups once more. Hopefully, you will be a simple case in which the household disposable income is sufficient and the property is still a safe security for the mortgage. If this is the case, we can search the entire market for a deal that meets your requirements. At the time of writing, we are transitioning most clients in this situation to a new product with their current provider. I don't charge any fees to do this work for you; mortgage lenders pay me a commission to do it.

We then enter the umbrella category of adverse constraints and additional borrowing. The more your, the property's, or the loan's requirements have changed for the worse, the fewer your options become and, as a result, the higher your monthly cost compared to the best in market deals. Even if this is the case, I can assist you in finding the best deal for you or in getting your finances in better shape.

Outcome

A lower monthly rate than the SVR for you, as well as a guaranteed outgoing for the duration of the discount. Some commission from the mortgage provider (pay my mortgage) for me, and profit for the mortgage provider by charging you a higher interest rate than they are paying to access the money. There's something for everyone.