Remortgaging, or switching your mortgage to a new lender, can be a smart financial move. It can help you save money on your monthly payments, reduce your interest rate, or even release equity from your home. But when is the best time to remortgage? In this article, we’ll explore the factors that can affect the timing of your remortgage and help you determine the best time to make the switch.
Understanding Remortgaging
Before we dive into the best time to remortgage, let’s first understand what it means. Remortgaging is the process of switching your current mortgage to a new lender. This can be done for various reasons, such as:
- To save money on monthly payments
- To reduce your interest rate
- To release equity from your home
- To consolidate debt
- To switch from a variable rate to a fixed rate mortgage
Remortgaging can be a smart financial move, but it’s important to carefully consider the timing of your switch.
Factors to Consider When Deciding When to Remortgage
Mortgage Rates
One of the main factors to consider when deciding when to remortgage is the current mortgage rates. Mortgage rates can fluctuate based on the economy, the housing market, and other factors. It’s important to keep an eye on mortgage rates and compare them to your current rate to determine if it’s a good time to remortgage.
Interest Rates
Another important factor to consider is the current interest rates. Interest rates can also fluctuate and can have a significant impact on your monthly mortgage payments. If interest rates are low, it may be a good time to remortgage and lock in a lower rate.
Your Current Mortgage Deal
If you’re currently on a fixed rate mortgage, it’s important to consider when your deal is coming to an end. Most fixed rate mortgages have a set term, typically 2-5 years, after which the interest rate will revert to the lender’s standard variable rate (SVR). This can often result in a higher monthly payment, so it’s important to start looking for a new mortgage deal before your current one ends.
Your Financial Situation
Your personal financial situation should also be taken into consideration when deciding when to remortgage. If you’ve recently received a raise or have paid off other debts, you may be in a better position to secure a lower interest rate. On the other hand, if your credit score has decreased or your income has decreased, it may be more difficult to secure a favorable remortgage deal.
Early Repayment Charges
Before remortgaging, it’s important to check if your current mortgage has any early repayment charges. These charges can be significant and may outweigh any potential savings from remortgaging. If you’re still within the fixed term of your mortgage, it may be best to wait until the term ends to avoid these charges.
The Best Time to Remortgage
Now that we’ve covered the factors to consider when deciding when to remortgage, let’s explore the best time to make the switch.
When Interest Rates are Low
As mentioned earlier, low interest rates can be a good indicator that it’s a good time to remortgage. This is because a lower interest rate can result in lower monthly payments and potentially save you thousands of pounds over the life of your mortgage.
Before Your Current Deal Ends
If you’re currently on a fixed rate mortgage, it’s important to start looking for a new deal before your current one ends. This will give you enough time to compare offers and secure a new deal before your interest rate reverts to the lender’s SVR. Most lenders will issue new mortgage offers for 6 months, so its wise to engage with a broker 7-8 months before you current product expires.
When Your Credit Score Has Improved
Your credit score plays a significant role in the interest rate you can secure on a mortgage. Many high street lenders will require a minimum threshold to be met to qualify for their product range. If your credit score has improved since you first took out your mortgage, it may be a good time to remortgage and secure a lower interest rate.
When You Need to Release Equity
If you need to release equity from your home, remortgaging can be a good option. This can be done by taking out a larger mortgage than your current one and using the extra funds for home improvements, debt consolidation, or other expenses. However, it’s important to carefully consider the impact of a larger mortgage on your monthly payments and overall financial situation.
When You Want to Switch from a Variable Rate to a Fixed Rate Mortgage
Variable rate mortgages can be unpredictable, as the interest rate can change at any time. If you want more stability and predictability in your monthly payments, it may be a good time to switch to a fixed rate mortgage. This will lock in your interest rate for a set term, giving you peace of mind and potentially saving you money in the long run.
Conclusion
Remortgaging can be a smart financial move, but it’s important to carefully consider the timing of your switch. By engaging with a specialist contractor broker like My Contractor Broker early, they will be able to monitor the marker taking into consideration your current mortgage deal, and evaluating your personal financial situation. They will be able to determine the best time to action your remortgage. Whether you’re looking to save money on monthly payments, reduce your interest rate, or release equity from your home, remortgaging can help you achieve your financial goals.