What Are My Remortgage Options?
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What Are My Remortgage Options? Frequently Asked Questions
Michael Webb talks us through our remortgaging options.
In 30 minutes, you’ll know a lot more about getting your first mortgage sorted.
My mortgage deal is coming to an end. What should I do?
This is a really popular question at the moment, and the first thing everyone should do is check when their current mortgage deal is ending and put that in the diary. Don’t let it sneak up on you.
Once you’ve established your mortgage deal end date, engage with a mortgage broker to assess the situation. One option is to remain with your current lender, looking at what they would offer as a product switch to retain your business. But you should compare that to the whole of the mortgage market to find the most appropriate deal based on your circumstances.
What we’re finding is that people who leave things too late can cost themselves a lot of money at the moment, especially if they revert to very high variable rates. We’re recording this in September 2023 and we’re on an upward curve of interest rates. So if you leave it longer, you’re potentially going to get a typically higher interest rate than if you secured a deal six months ago.
You can get a mortgage offer with six months validity on it, so if you were set to complete in September 2023, the interest rate you would have got in March would be a lot lower than if you’d started that process in July or August.
So, establish when your deal is ending. If a good mortgage broker arranged your current deal, they will contact you seven or six months out anyway. But acting as soon as possible is really important.
Is now a good time to remortgage?
The period we’re going through at the moment is proving quite challenging for people. Clients are coming off historically low interest rates – some people have been paying less than 1%, while many are at around 2%.
These clients are finding that there is a payment shock – their mortgage payment is increasing quite significantly in some cases.
In terms of whether it’s a good time to remortgage, it’s all about the timing. The best time to secure a new interest rate is six to seven months out from the end of your deal. As the last year has shown, waiting could make it more expensive for you. That’s not always going to be the case going forward, but a good mortgage broker will continue to assess things for you.
You can always walk away from a mortgage offer if it hasn’t started and something cheaper becomes available. But you can avoid risk by securing yourself a deal as early as possible.
How quickly can you remortgage?
It will depend on your situation. For very easily underwritten cases, some lenders can get a mortgage offer out on the same day you apply. They can access your banking information and see that the income you’ve declared is what is being paid into your bank every month. They can see it’s from the employer you say you work for, and there’s a history of that.
They’re able to do an electronic valuation on your property if it’s a low loan to value mortgage, and if you’ve got lots of equity in it, there’s very little risk to the new lender. Everything’s automated and they can just generate the mortgage offer within a few hours.
Where that isn’t the case, it might take a week or two to get a mortgage offer, and perhaps longer if a physical valuation needs to take place. Then obviously you have the legal process. Even if you get a mortgage offer the same day, there’s still the legal work involving redemption statements for your current lender.
A couple of weeks is the fastest, otherwise the average is around a month to six weeks.
Can I remortgage before my deal ends?
Technically you can, providing you meet all the criteria. Your case would go through very enhanced compliance checks to make sure that it’s the right advice for you, especially if you’re leaving a very low interest rate and paying a penalty to do that, as it doesn’t really make financial sense.
Technically you could do it, but there would have to be a very good reason.
Can I move to a new rate when my current mortgage deal ends?
In most cases, yes, but there will always be some exceptions. For example, most lenders will offer a retention rate to you. That would be classed as a product switch, a product transfer or a retention deal.
There will still be some criteria for you to meet to get that rate. Usually your mortgage account will need to be up to date, not be in arrears and there have been no issues with you paying the mortgage.
You could also look to move to another lender, based on income, affordability, Loan to Value and all of the usual mortgage criteria.
Can I extend my mortgage term?
If you’re staying with your existing lender, that’s probably going to be more tricky. They may or may not offer that.
If you’re going to remortgage, then obviously we can support you within the criteria of the lenders. Typically, most lenders will remortgage people up to retirement, and 70 is now a common age to retire.
If the term doesn’t take you beyond 70 then you can extend. There’s also the possibility to extend the mortgage beyond 70 – but more questions will be asked. Some lenders will take you to 75 and beyond, as long as you have the ability to pay the mortgage at that point.
Again, it’s looking at whether extending the mortgage term is the right advice for you and what your plans are.
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Can I fix my mortgage with rates increasing? How long should I fix my mortgage?
There are fixed rate mortgage products in the marketplace, typically for terms of two, three, five, seven and ten years. I think even a 25 year fix dropped in and out of the market recently.
When you fix a mortgage, you agree to pay a penalty if you decide to pay it off within that time. That penalty is called an early repayment charge. The lender expects you to stick with the mortgage product for a certain number of years – but obviously life can throw unexpected things at you. You might separate from a partner or need to move.
So you need to have these conversations about your plans over the next two to ten years. Do you see yourself staying in that property? Do you see yourself moving? Do you have children and are you going to need somewhere bigger? Your mortgage broker will manage that conversation with you and start to paint a picture of how long you should fix your mortgage for.
There isn’t a one-size-fits-all answer. We also need to consider what interest rates will do – and again that’s very difficult to predict. It probably shouldn’t be the main driver for your decision on how long to fix your mortgage for.
Will mortgage rates go down in 2023?
There’s nothing in the immediate timeframe to suggest that rates are going to drop in 2023. Whilst no one can say exactly what’s going to happen, we’re about a week away from September’s Bank of England base rate review. The media would have you think that we’re in line for another base rate increase, to continue the drive to lower inflation.
Inflation seems to be the key driver of interest rates at the moment, and when the media says inflation is dropping, it doesn’t mean things are getting cheaper. It just means they’re getting more expensive, more slowly.
So unless we go into a deflation situation, which the government won’t let happen, we won’t be seeing things get cheaper. Until they can drive that inflation rate down to the target of about 2%, we will probably see that base rate continue to move in an upward direction.
Can I remortgage with credit card debt?
It’s very common nowadays for people to have some element of credit card debt. That’s factored into affordability calculations.
If you’re looking to move your credit card debt onto your mortgage, some serious questions need to be asked about the suitability of doing that. You’re taking unsecured, technically short-term debt and making it secured and long-term. Lenders and mortgage brokers will want to understand the suitability of you doing that.
That’s not to say that you can’t. As long as it meets the affordability calculations, then remortgaging with credit card debt isn’t a problem.
Can you remortgage a Help to Buy loan?
This is another very common thing. Lots of people bought new builds with the Help to Buy scheme – it was very popular. These remortgages are coming around very frequently now.
When you remortgage, you can either retain your Help to Buy loan and just remortgage the element that you own, or you can remortgage to pay back the loan. Obviously we need to remember that the Help to Buy loan is an equity share. So you will have to repay 20% of your property value at the current time. It’s not the amount of money that you were given when you bought the home, if that makes sense.
How can a mortgage broker help if somebody’s looking to remortgage?
Over the last year, people who have worked with a mortgage broker have probably had a better outcome than those that have been doing it themselves.
A broker should be switched on to the fact that they need to be contacting clients about remortgages due in seven or eight months’ time. Otherwise, most people only realise that their deal is ending when they get a letter from their bank.
It might say that your next monthly payment is on the standard variable rate (SVR), and that the rate is going from 1.5% up to 7.5%, or whatever the numbers are. You have a massive payment shock coming and no time to rectify it.
A broker can help by having that long-term working relationship with you. We can manage your mortgage and make sure you’re only ever paying as little as possible for your situation.
The mortgage market is constantly changing. At the moment, interest rates are going up and even going down while the Bank of England base rate is going up. Fluctuations can happen whilst you’ve got a mortgage offer sitting there. A broker will be constantly reviewing that for you, to get you the most competitive deal available in the timeframe.
We will also delve deep into your plans to decide what kind of product is going to be most suitable for you.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up with your mortgage repayments.
You may have to pay an early repayment charge to your existing lender if you remortgage.