Is it wise to remortgage your house? image

Is it wise to remortgage your house?

If you are wondering whether or not it is wise to remortgage your house, there are definitely a few things to consider. A remortgage on your home can be an incredibly beneficial approach as it has the potential to save you a considerable amount of money on your monthly repayments. In other cases, all of the efforts of acquiring a remortgage might not be worthwhile financially. You will need to consider your circumstances in great detail before making the decision to remortgage your house. In this article, we are going to outline when is it wise to remortgage your house and offer tips to make sure that it is the best approach for you.

What is a remortgage?

Remortgaging a house is the process is switching to a new mortgage provider with a new contract. It normally has a lower interest rate than you are currently paying, which drops monthly payments and helps you save money.

A mortgage is often offered to you with an initial interest rate that is lower for around two to five years. After this period, the rate of interest will rise. What this means is that there is a fiscal benefit to remortgaging as you get to reap the benefits of the initial low-interest payments.

Read more: How do you remortgage your property?

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Is it wise to remortgage your house?

Remortgaging your house is a big decision, so it is important to review the mortgage market and track the current interest rates with the Bank of England. Fluctuations in the interest rate will directly affect your payments, so monitoring the ‘bank rate’ can help you gauge the viability of a remortgage.

When a bank offers you a mortgage, they will offer you a slightly higher interest rate than their current bank rate so that they can make a profit. This is a flexible scale, so it is always a good idea to assess how much they are charging you compared to the current bank rate.

When the bank rate is low, you should expect to pay a lower monthly payment on your remortgage instalments. All banks set their own rates, though, so it is definitely a good idea to compare the market.

If your mortgage is set to a variable rate, then your monthly outgoings will fluctuate over time. When the rate is low you pay less, but as the rate increases so too will your payments. It can sometimes be a good idea to switch to a new mortgage provider with a fixed rate after your variable rate increases.

Undertaking a remortgage can be a useful asset for homeowners looking to avoid being locked into a high-interest rate. However, this is not always the case when you factor in the various fees attached to leaving your existing provider. In short, it is going to largely depend on your circumstances, interest rates and fees associated with switching providers.

When is a good time to remortgage?

Knowing when to remortgage your house will help you secure the most beneficial interest rates and lower your monthly bills. Try to keep track of when your existing mortgage is coming to an end so that you can measure it against the new standard variable rates.

Compare the various mortgage offers currently available and try to find the cheapest fix rate or standard variable rate before your current mortgage expires. Do not remortgage before the deal ends as you may have to pay an early exit fee and early repayment costs.

Related: Is it easy to remortgage your home in 2021?

Is remortgaging to a fixed rate wise?

A fixed-rate offer on your remortgage can ensure you are locked into a cheaper rate, depending on when you choose to do it. Monitoring the Bank of England’s own bank rate for when it might drop is a good way to assess when it might be a good idea to switch to a fixed-rate mortgage.

Unfortunately, there is no guarantee that the Bank of England will go ahead with a lower interest rate on speculation alone. That leaves room for error as ultimately the decision to lower the rate falls on the Bank of England, who may choose not to. Fixed-rate deals tend to work best when the interest rates are in flux or if you are looking for more stable repayments.

When is a good time to fix a mortgage rate?

Mortgage rates are directly tied to the bank rate, which in turn is affected by the overall economy of the UK. When the economy is healthy, the bank rate will be set a little bit higher because more money is circulating between people. When the economy is down, the bank rate stays low to encourage more lending from customers. All of that means the best time to switch to a fixed mortgage rate is just as the economy is recovering from a downturn.

What costs are involved in remortgaging?

When you remortgage you will have to switch to a new mortgage provider to pay off your existing mortgage. This essentially switches your mortgage payments over to a new provider. When doing this, there are a few associated costs that you should consider. In some cases, these additional fees might outweigh the value of remortgaging, so it is important to factor these in.

The charges that you should take into consideration when remortgaging include:

These costs can accumulate to the point that they might not be worth remortgaging, so it is important to take the time to calculate these fees and factor them in before deciding to remortgage.

Remortgaging your house won’t provide you with immediate savings, but it can still be a very worthwhile endeavour over time. Over a period of months and years, you could end up saving a considerable amount of money if you are savvy with your choice of mortgage provider.

To give you a good idea of if is it wise to remortgage your house, you can use our affordability calculator to assess your circumstances. If you have any questions about remortgaging your property, please contact our specialists at WIS Mortgages for free professional advice.

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As a mortgage is secured against your home/property, it may be repossessed if you do not keep up with the mortgage repayments.

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