The UK mortgage market is an evolving landscape. Remortgaging allows homeowners to manage their financial capabilities better while providing them an opportunity to put aside a significant amount as savings. To reap the most out of remortgaging, it is important to understand the workings of a remortgage and how it can be a valuable component of your mortgage.
How does remortgaging in the UK work?
A remortgage essentially means switching your existing mortgage to a new mortgage deal, with a different lender. Remortgaging is done when you see your existing mortgage isn’t going to bring you any further advantages and are looking to benefit with a more favourable interest rate or even borrow additional funding against the value of your existing property.
Remortgaging involves switching to a new mortgage deal with a different lender, typically to secure a more favourable interest rate or borrow additional funds against the equity built up in your property. This process often entails early repayment charges associated with your existing mortgage, but the potential savings can outweigh these initial costs.
Can you save when you remortgage?
The answer is ‘yes you can’. Remortgaging in fact offers many benefits. Among them is the possibility to save up on otherwise higher expenses in your mortgage.
- Saving up on interest rates is probably the most significant benefit. By remortgaging you could be looking at better interest rates that allow you to cut back on your current repayment expenditure. This is a definite plus when it comes to savings that you could put away for the future.
- By remortgaging you could release some of your property’s equity. While this may depend on your lender’s affordability and eligibility criteria, by releasing equity you will be able to release liquid or ready cash that can help you sort out urgent matters such as settling a debt, urgent house maintenance, or even a car repair.
- Another great benefit for saving by remortgaging is the option of switching to a fixed rate mortgage term. Fixed rate mortgages remain unchanged even with interest fluctuations. A notable would be, that if you were on a fixed rate mortgage term and didn’t go in for a remortgage before your term ended, your lender has the option of switching your fixed mortgage to a Standard Variable Rate mortgage (SVR). If interest rates are at a higher level at this point in time, you will most likely end up paying a higher interest rate and thus more in interest than what you'd have paid whilst on a fixed rate deal.
- When remortgaging, you may wish to get help from an experienced mortgage broker. They are updated with the latest news in the mortgage market and have a good idea of deals that could bring you competitive mortgage rates that could be profitable. As a result, you will be able to save up some money. BVS Financial Services and Mortgages are staffed with well experienced mortgage advisers. Speak to them regarding your upcoming remortgage.
How to maximise your remortgaging savings
Here’s how you can benefit from your remortgage and maximise your savings.
Evaluate: Just like any item on the market you may wish to purchase, you must evaluate your options before deciding on a lender for your mortgage. Do a bit of looking around. Lenders are competitive and may offer you a better deal than their competitor to make you their customer. Consider their terms and conditions and decide.
Early settlement: Yes, this is certainly a way to up your savings. By settling off your debt early, you will be able to save up on a long term interest payout. How does it happen though? You may have encountered a positive change in your income levels since you started on your current mortgage.
By remortgaging, you could reduce your payment period by allocating the additional money to pay off the mortgage before it’s entire term. The monthly premium will be higher, but your term of repayment will be shorter. This can effectively bring you benefits in the way of savings. Something to note however, do consider any repayment charges that might apply when opting for an early settlement of the mortgage. These may be applicable according to the terms and conditions. While an early settlement can bring you significant savings, lenders may have conditions in the agreement where a penalty is payable if a mortgage is settled before it’s due term. A mortgage broker will be able to calculate for you whether it offers you significant financial saving to re-mortgage and pay a penalty to move lender or whether you're best to remain as you are.
Remortgaging can optimise your mortgage and potentially unlock significant savings. By understanding the dynamics of remortgaging, homeowners can make informed decisions that enhance their financial goals and objectives. Remember, seeking professional advice can provide valuable insights and help you navigate the remortgaging process with confidence.
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 15/01/2024