As you enter the exciting but complex world, you’ll know that being a responsible adult goes beyond arriving at work early, eating healthily, and paying the bills on time. This lifelong endeavour means learning to manage your finances wisely. It will also help you gain monetary independence and live your best life.
One significant responsibility you must never overlook is settling your mortgage, especially if you plan to own a house. However, as you pay the monthly due, you may ask yourself, “Can I remortgage early?” Although you can do this before your current deal ends within six months or before rates increase, you must know about early repayment charges.
If you’re ready to make more informed financial choices, this article will define remortgaging, how it works, and the best time to get a new one.
What Is a Remortgage?
Getting a remortgage means replacing your existing mortgage with a new one for the same or a higher amount. This opportunity lets you negotiate more favourable terms and interest rates. If you opt for a remortgage with a higher amount, it allows you to release some of the equity in your home.
How Does It Work?
The remortgage process involves the following:
- Getting an Agreement in Principle.
- Considering costs like application and valuation fees.
- Applying for a new mortgage.
- Completing the remortgage by having your property valued and transferred with a solicitor or conveyancer’s help.
Ensure you provide information about your personal and financial circumstances and have documents proving your income and credit commitments.
3 Situations to Remortgage Early
After defining remortgage and understanding how it works, this section will enumerate the best times to get a new one early.
1. After Your Fixed Term Mortgage
Fixed-rate mortgages have a set period, usually between two and ten years, where the interest rate remains unchanged. After this period, the mortgage usually switches to the lender’s standard variable rate, typically higher.
If you currently have a fixed-rate mortgage, you must remortgage at the end of the term if you don’t want to switch to the standard variable rate. The interest rate for the new deal will depend on the current market rates. Sticking with the same lender is unnecessary, and we recommend exploring other options.
2. You Built More Equity in Your House
Equity is the gap between your home’s value and the outstanding mortgage amount. Professionals consider this relationship as the loan-to-value (LTV) ratio. When your property’s value increases, your mortgage percentage decreases. A higher equity and lower LTV ratio can result in more favourable remortgage options.
If you have paid off 75% of your mortgage, you have a deposit of 25% in the property. It means you may receive more favourable terms than when you bought the property and had to take out an 85% mortgage while remortgaging. When your loan-to-value ratio falls below 50%, you should access most of the deals available, provided you meet the lender’s other criteria.
3. The Interest Rates Are Lower than Your Payments
Mortgage providers frequently introduce new mortgage packages, and you may discover that more affordable alternatives are available. It could result in significant savings. You can opt for a fixed-rate mortgage, which guarantees that your monthly payments will remain constant for the duration of your fixed term, irrespective of any changes in other rates.
If you want to remortgage while still in the middle of your fixed rate, check for Early Repayment Charges, which can be hefty. Use a calculator to determine whether it’s worth remortgaging if interest rates have dropped since you took out your current mortgage.
Final Thoughts
Early remortgaging can benefit homeowners, but you must consider your circumstances and the associated costs. You can make more informed financial choices by speaking to a reputable mortgage adviser.
If you’re a homeowner considering getting a remortgage in Brighton, contact Everest Mortgage Services! We’re committed to helping homeowners find the perfect deal. Our experts also provide award-winning services. Let’s talk now!
