Remortgaging is a crucial financial decision that can save you money and provide various benefits. It involves replacing your current mortgage with a new one, typically to secure a better interest rate or access additional funds. 

One significant reason to consider remortgaging is to avoid the lender’s high standard variable rate (SVR), which can result in increased monthly mortgage payments. Here, we will explore the importance of remortgaging and why you should consider it as an option.

Understanding the Standard Variable Rate (SVR)

The standard variable rate, or SVR, is the interest rate charged by lenders after the initial mortgage deal period ends. It is typically higher than the rates offered during introductory periods, such as fixed-rate or tracker mortgages. Many borrowers find themselves on the SVR once their initial deal ends, resulting in a sudden increase in their monthly mortgage payments.

Benefits of Remortgaging

Remortgaging offers several benefits that can make a significant difference to your financial situation.

Securing a Better Interest Rate

By remortgaging, you have the opportunity to secure a new deal with a lower interest rate. Even a slight reduction in the interest rate can lead to substantial savings over the long term.

Saving Money on Monthly Mortgage Payments

A lower interest rate translates into lower monthly mortgage payments. This can free up extra funds that you can use for other purposes, such as saving for the future or paying off other debts.

Accessing Additional Funds

Remortgaging can allow you to release equity in your property, giving you access to additional funds. These funds can be used for home improvements, investments, or any other financial needs.

Consolidating Debt

If you have accumulated multiple debts, remortgaging can provide an opportunity to consolidate them into a single mortgage. By consolidating your debts, you may benefit from lower interest rates and more manageable monthly payments.

Look For a New Mortgage Well in Advance

To make the most of remortgaging, timing is crucial. It is advisable to start looking for a new deal no later than three months before your current mortgage term ends. This time frame allows you to explore different options, compare rates, and go through the necessary administrative processes.

By initiating the search early, you can secure a new deal with favourable terms, ensuring a smooth transition from your current mortgage to the new one without incurring the lender’s SVR.

Switching Mortgages Before the Term Ends

While it is ideal to remortgage as your current term deal ends, switching mortgages before the term ends can also be an option. However, it is important to consider the potential costs involved, such as early exit fees. 

These fees can sometimes outweigh the cost savings achieved through a new mortgage deal. Careful consideration should be given to assess whether the financial benefits of switching outweigh the associated fees.

Taking Advantage of Increased Property Value

Another reason to consider remortgaging is when the value of your property has significantly increased since you initially took out your mortgage. Remortgaging in this scenario allows you to release equity and benefit from the increased value. You can use the released funds for various purposes, such as home renovations, investments, or paying off other debts.

Steps to Remortgaging

Remortgaging involves several steps that should be followed carefully:

Assessing Your Financial Situation

Before considering remortgaging, assess your financial stability, including income, expenses, and any outstanding debts. This evaluation will help determine whether remortgaging is the right option for you.

Researching Mortgage Options and Rates

Research different mortgage options and rates available in the market. Consider factors such as interest rates, fixed or variable rates, and the terms and conditions associated with each mortgage deal.

Seeking Professional Advice

It is advisable to seek professional advice from a mortgage broker or financial advisor who can guide you through the remortgaging process. They can help you understand the options available, evaluate your financial situation, and find the most suitable deal.

Applying for a New Mortgage

Once you have selected a mortgage deal, you will need to apply for the new mortgage. This involves submitting the necessary documentation, such as proof of income, identification, and details about your current mortgage.

Remortgaging can be a wise financial move, especially when it helps you avoid the lender’s high standard variable rate. By securing a better interest rate, saving money on monthly payments, accessing additional funds, or consolidating debt, you can improve your financial situation and gain more control over your mortgage. However, it is essential to carefully assess your individual circumstances, seek professional advice, and consider all the factors before making the decision to remortgage.

If you are looking for a mortgage broker to help you find the best possible deals on your new mortgage, please get in touch.