Contractor Remortgage – Myths and Misconceptions

Do not allow any misconceptions about remortgaging to deter you. The process of switching to a new mortgage deal as a contractor can be swift and effortless, potentially resulting in substantial savings of thousands of pounds.

You have the flexibility to remortgage to a new deal at any given time. Even if you are required to pay an early exit fee from your current deal, it is possible to still save money in the long run. It is important to note that remortgaging as a contractor  does not necessarily mean borrowing more money, although it is an option if needed.

By remortgaging, you have the potential to significantly reduce your annual mortgage payments by hundreds or even thousands of pounds. However, there are numerous myths surrounding contractor remortgaging that need to be debunked. This guide aims to address these misconceptions and assist you in determining whether remortgaging is the right move for you.

Myth 1: Remortgaging is expensive.

The objective of remortgaging is to reduce costs, not increase them. Ideally, your monthly payments should decrease, unless you are significantly increasing the amount you are borrowing. While it is true that remortgaging often involves fees, these should be compared against the overall cost savings, including both the fees and the interest paid over the mortgage term.

In some cases, switching to a deal with higher fees may be more cost-effective than sticking with your current deal, especially if you are paying your lender’s standard variable rate (SVR). Alternatively, a deal with slightly higher interest rates and lower fees may be a better option. Many lenders even cover the legal fees and property valuation costs associated with remortgaging, so the only charge you may have to pay is the mortgage arrangement fee.

Myth 2: The lowest interest rate is always the best.

While a low interest rate is appealing, it is not the sole factor to consider. Set-up fees, such as mortgage arrangement fees, can significantly impact the overall cost of remortgaging. Deals with low-interest rates often come with substantial set-up fees.

For those with larger mortgages, it may make sense to trade a low rate for a high fee. However, for smaller loans, a deal with slightly higher interest rates but more reasonable fees may be more beneficial in the long term. Additionally, some homeowners may opt for a fixed-rate mortgage to avoid potential future interest rate hikes, even if tracker deals may seem cheaper at the moment.

Myth 3: Remortgage only after your current deal ends.

The truth is, you can remortgage whenever you want. The key is to ensure that doing so will save you money. If you are on a fixed rate, a discounted rate, or a tracker deal that is nearing its end, you can often save money by applying to remortgage three (or in some cases up to six) months before it ends.

This way, you can avoid spending any time on an uncompetitive SVR. However, if you will have to pay a high early repayment charge or penalty to switch from your current deal, you will need to find a much cheaper deal for it to be more cost-effective overall.

Myth 4: Bad credit means no remortgaging.

Even with a poor credit rating, remortgaging is still possible. While the most competitive deals may be out of reach, there are still options available.  It is crucial to check your credit report and take steps to improve it before applying for a remortgage.

My Contractor Broker can assist you in determining whether remortgaging will save you money.

Myth 5: Changed financial circumstances prevent remortgaging.

A decrease in income does not automatically disqualify you from remortgaging. Lenders will assess the affordability of the new mortgage amount and the interest rates. However, if you have recently lost your job, remortgaging may not be an option at the moment.

If you are struggling to make your monthly mortgage repayments, it is advisable to communicate with your existing lender. Additionally, if you are looking to move house, our online calculator can help you understand what could be possible

Myth 6: Remortgaging is too complicated.

The process of remortgaging is quite similar to obtaining your initial mortgage. If you choose to switch to a new deal with your current lender, the process may be even more straightforward. The required documentation is the same, and the most time-consuming part is often waiting for lenders and solicitors to complete their work.

Myth 7: Only brokers offer good deals.

It is a common misconception that the most attractive remortgage deals can only be found through brokers. In reality, you can apply to remortgage with any lender, including your existing bank or building society. However, as a contractor it is imperative your new lender understands how you work and how you pay yourself.

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Ready to get started ?

Speak to a MyContractorBroker specialist on 02394 211120

#get in touch

Ready to get started ?

Speak to a MyContractorBroker specialist on 02394 211122

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