Remortgages - Worth The Switch?

The Growing Popularity of Remortgaging: What You Need to Know

Remortgaging has become an increasingly popular option for homeowners looking to optimize their mortgage arrangements. Essentially, remortgaging involves switching to a different mortgage, potentially with a new lender, to benefit from better terms or lower interest rates.

Why Remortgage?

1. Adapting to Changed Circumstances: If your financial situation or personal circumstances have evolved since you first took out your mortgage, you might find a new mortgage better suited to your current needs. Additionally, if you initially chose a mortgage with a special introductory rate that has since reverted to a higher rate, remortgaging could help you secure a more competitive deal.

2. Saving Money: Switching mortgages can result in significant savings, but it's important to carefully evaluate the costs involved.

Key Considerations Before Remortgaging

1. Charges: Check if there are any early repayment penalties on your current mortgage. In some cases, the long-term savings from a lower interest rate might outweigh these penalties, making remortgaging worthwhile.

2. Fees: Be prepared for the associated costs of a new mortgage. This may include valuation fees, solicitor's fees, and any arrangement charges. Some mortgage deals offer incentives such as cash contributions toward these costs or ‘fee-free’ options. Evaluate these costs against potential savings in interest to determine if switching is financially beneficial.

3. Features: New mortgage products offer various features that may align with your needs:

   • Flexible Mortgages: Allow greater control over payments and term adjustments.

   • Current Account Mortgages: Integrate your mortgage with your current account, consolidating debts and savings to potentially secure better interest rates.

   • Offset Mortgages: Let you maintain separate accounts while using your savings to reduce mortgage interest, without affecting your account balance.

4. Equity Release: If the value of your property has increased since you took out your mortgage, you may be able to remortgage for a higher amount and release some of the equity as cash. However, borrowing capacity will be influenced by your income and property value. For retirees, equity release schemes can offer cash or a regular income by selling your home to a provider while allowing you to live in it rent-free. Options include:

   • Home Reversion Plans: Sell your home while retaining the right to live there.

   • Roll-Up Schemes: Accumulate interest on the amount borrowed.

   • Home Income Plans: Combine a loan with a regular income.

Ensure that any equity release scheme is regulated and a member of the Safe Home Income Plans (SHIP) to protect your interests.

Conclusion

Remortgaging can offer financial benefits, from lower interest rates to better mortgage features, but it requires careful consideration of charges, fees, and long-term savings. Evaluate your options thoroughly to make an informed decision that aligns with your financial goals and circumstances.