We manage our wealth so we should manage our debt.. After all debt costs us more than our wealth does. All homeowners should be plugged into a mortgage management platform as this will automatically provide them with insights such as when they could switch their mortgage to a cheaper rate by remortgaging or reduce their interest rate costs by overpaying.
What is remortgaging?
Remortgaging is the process of switching to a new deal if you are on a mortgage. This could be with your current lender or a new one. Typically your new lender will make you offers that beat the competition to stay with them.
So when should you consider remortgaging?
Remortgaging can be done at any time but there are a few times when it produces great savings. One of those times is the first few years of the mortgage. This is because the most interest is charged at this point. Remortgaging after the first few years is always good because you can remortgage immediately after the lenders introductory offer ends. This could be a fixed term mortgage offer, capped or discount introductory rates.
Your mortgage lender will usually move you from an introductory deal to the standard variable rate which is typically more expensive, at this point the fees for switching to a new lender should be significantly low if they exist at ll with your mortgage lender. You can switch from one introductory offer to the other. This is very common especially for those who want to switch from a fixed rate mortgage to another fixed rate mortgage with a lower rate.
You should watch out for the early repayment charges. Some lenders use this to try and persuade homeowners to avoid remortgaging to a new lender due to the high cost of fees associated with the switch.
Another good time to remortgage is when you have a significant amount of equity in your property, this could be because of your house price rising, overpaying on your mortgage or just due to you paying your mortgage over a long period of time, usually towards the halfway point of the mortgage term.
Should you remortgage at all?
You should only consider remortgaging when there is a chance of huge savings from a reduced or fixed interest rate.
When remortgaging you must consider the fees charged by your old lender and new lender when calculating your potential savings. A mortgage management platform will have already worked this out for you but it is important to take this into consideration if you are not plugged into a mortgage management platform.
Remortgaging is relatively straightforward. The process is similar to the one you undertake when getting a mortgage.
The only difference is that the lender will not carry out any physical checks in most cases. As you have more equity and hence you are borrowing a lower amount you should expect to save more by switching. You must consider that when you remortgage a lender will still look at your overall mortgage affordability and if your financial situation should have changed and you are deemed less likely to keep up your mortgage payments this will be reflected on your credit score and may limit your access to future credit in the short term.