Remortgaging when your mortgage deal expires could save you money. According to the HomeOwners Alliance, the application process can take up to three months, so being organised could mean you avoid potentially paying a higher interest rate than you need to.
When your current mortgage deal ends, you may choose to search for a new deal. This isn’t something you have to do. But it could mean you access a lower rate of interest or can choose a mortgage that better suits your needs, such as the ability to make overpayments without facing a charge.
Usually, when your mortgage deal ends, if you don’t take out another deal, you’ll be moved on to your lender’s standard variable rate (SVR). The SVR often isn’t competitive, so you may want to review what this would mean for your repayments.
Over the last 18 months, the Bank of England (BoE) has increased its base interest rate several times. As a result, many mortgage holders are facing higher outgoings. Remortgaging may provide a way to reduce a potentially large increase in your mortgage repayments, particularly if your current mortgage deal has a fixed rate of interest.
However, you should keep in mind it may not be possible to find a new mortgage deal that offers a comparable interest rate to your existing one. Many homeowners need to prepare for higher repayments, even if they remortgage, due to rising interest rates.
As the process can take several months, being organised when you remortgage could save you money.
4 useful tips that could make remortgaging smoother
1. Apply for a new mortgage deal before your current one expires
When your mortgage deal ends, you may start paying a higher interest rate. So, having a new deal lined up before your current one expires could make sense.
You can often lock in a new deal up to six months in advance. Making a note of when your deal ends and preparing well in advance could mean you seamlessly move from one deal to another. It may mean you avoid a period where you’re paying a higher rate of interest between deals.
Lining up a new mortgage can also mean you avoid making quick decisions and have time to think through your options.
As the BoE has gradually increased its base interest rate since the end of 2021, locking in a new deal early could also mean you access a lower rate if further rises were announced. Of course, further interest rate rises cannot be guaranteed, and the base interest rate may even fall.
When your current deal is nearing its end, your lender will often get in touch. The application process may be quicker if you choose to remain with your current lender. However, it may not be the right deal for you, so it’s often still worth looking at different options to weigh up the pros and cons.
2. Organise the documents that will support your application
Even though you may have consistently paid your mortgage for years, lenders will still need to check affordability when you remortgage.
Lenders may ask for proof of identity and address, income, and mortgage repayments. They may also request bank statements, so you should be cautious of spending red flags, such as gambling or payday loans, in the months before you remortgage. If you’re self-employed, lenders may require up to three years of financial records too.
Getting everything together before you apply for a new mortgage could speed up the process and mean you’re better able to identify the options that are right for you.
3. Check your credit report
Lenders will use your credit report to assess if a mortgage is affordable and whether you meet their criteria.
Issues that may seem minor, like an error on your address, could mean your application is delayed or, in some cases, rejected. You can contact credit reference agencies to fix mistakes.
You should also review your report to see if there is any information that could put off potential lenders. For example, have you missed loan repayments? Or are you using a large proportion of your available credit? If you can, addressing issues like these could help you to secure a more competitive deal.
Alternatively, if there are potential issues on your credit report, a specialist mortgage lender might be more suitable for you.
It can take several months for changes to show up on your credit report. So, it’s a good idea to take tackle potential problems sooner rather than later.
4. Avoid significant changes to your financial circumstances
Sometimes changes can’t be avoided, but, if you can, make sure your financial circumstances are stable in the months before you’ll apply for a new mortgage.
Switching jobs or increasing your borrowing may be a red flag for potential lenders as it could suggest that your financial situation is changing.
Working with a mortgage broker can be useful when you remortgage
Navigating the mortgage market can be challenging. There are lots of lenders you may want to consider and comparing deals can be difficult. Before you apply, you’ll also want to understand if you meet the lender’s criteria. This can make the process stressful, but working with a mortgage broker could ease some of the pressure.
A mortgage broker will be able to search through the mortgage options quicker than you may be able to. This is particularly important in the current environment. As the BoE changes the interest rate, lenders are removing deals quicker – according to Moneyfacts, at the start of 2023, the average shelf life of a mortgage was just 15 days.
A broker will also be on hand to review your application. They’ll be able to spot errors or red flags that could delay the process, or even mean your application is rejected.
What’s more, if you may need to remortgage again in the future, a mortgage broker can give you a handy reminder before your deal ends to help you avoid a last-minute rush.
If you want to talk to us about your mortgage needs or have questions about remortgaging, please contact us.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
