The housing market in the UK and London in particular, is dynamic and volatile. In this type of property market remortgaging can be a powerful tool for homeowners looking to optimize their financial standing.  

Maybe you're aiming to save up some money, free up liquid cash, or invest in another property, a well-planned remortgage strategy can bring you significant benefits. This blog is about what you can do to make the most of your remortgage in the UK. 

What is Remortgaging? 

Remortgaging your property essentially means switching your existing mortgage from one lender to another, taking on a more gainful deal with your current lender, or even another lender. It allows you to take advantage of potentially lower interest rates, different mortgage products, or even to borrow additional funds. 

Maximizing your remortgage 

Here are some strategies that can help bring profitable results from your remortgage. 

Optimize your savings:  

Lowering your interest rate through remortgaging can result in significant monthly savings, potentially freeing up a substantial amount of money for other matters such as renovating your existing property or even the construction of an extension.  

Release Equity:  

It is a known fact that property value increases with time. And if you have been repaying your mortgage installments without defaulting, the equity of your property would have increased since your initial mortgage. For example if the initial equity (value of the property you own) was 20%, over a period of time the equity will increase and you could be owning 40% of the property at the point you are looking to remortgage.  

The increase in equity is important when it comes to remortgaging the property. Reason being that your LTV (Loan to Value) ratio of 80% would have been reduced to 60%. This will act as a defined advantage as well as help your savings when you go for a remortgage. A low LTV means your monthly installments will be significantly reduced. Another plus to increased equity is that a lender may not only offer better rates, but also see you as a less risky borrower, thereby increasing your chances of getting your next mortgage easily. 

Switch from a SVR to a Fixed rate mortgage:  

If your mortgage is a SVR (Standard Variable Rate), there’s always the chance of interest rates rising or falling. By remortgaging to a fixed-rate, you are guaranteed of a fixed interest rate. This offers greater predictability, possibility for savings and for budgeting. 

Reduce your mortgage Term:  

Remortgaging provides an opportunity to shorten your mortgage term. By shortening your mortgage term, you potentially stand to save money by ending your mortgage early. However keep in mind that in order to reduce your mortgage term, your lender may revise interest rates, which means you could potentially end up paying a higher monthly interest rate. 

To ensure this arrangement works for you, it might be wise to consult your mortgage advisor. BVS Mortgages and Financial Services offer expert mortgage advice. Their advisers will provide you with the insight you need before you decide to go ahead. 

Other considerations 

Current interest rate:  

You may want to compare your current mortgage rate with other remortgage deals available in the market. This will provide you with a good idea about the current rates, and allow you to make informed decisions before proceeding with a remortgage.  

Early repayment charges (ERCs):  

This is an important check you will need to do with your current lender. Ending your mortgage early usually carries a penalty and this is known as the ERC (Early Repayment Charge). Speak to your lender about ERC clauses and how much you may have to pay if you end your mortgage early. 

Financial Goals:  

Identify your primary objective for remortgaging – saving money, raising capital, or simply improving your existing mortgage deal. This will help you achieve and optimize your financial goal. 

Conclusion 

By following these pointers and making informed choices, you can turn your remortgage into a strategic financial move. You will be able to gain benefits that can not only enhance your mortgaging experience, but also and propel you towards better financial goals. 

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. 

 * Approved by The Openwork Partnership on 01 Jul 2024