When is the Best Time to Remortgage?

When is the Best Time to Remortgage?

Hayley Hellon

Hayley Hellon

|

March 16, 2022

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For homeowners, there are multiple reasons as to why they might be considering remortgaging their property. It could be that their current mortgage deal is due to finish, they want to release some equity or are simply looking for a better deal.

If you’re considering remortgaging your home then there are a few points you need to know before approaching a bank or building society to check the latest deals. But, don’t worry we’re here to help.

What is remortgaging?

Starting at the very beginning, remortgaging is the process of changing from one mortgage lender to another without moving home. Remortgaging most commonly happens when the first mortgage deal on a home comes to an end and the home owners have the opportunity to seek out better deals, which can reduce their monthly repayments.

In this case, the remortgaging process can be quite simple and quick depending on the lender you have chosen to switch to. Making sure you check out several different lenders and deal available to you and are not just restricting your search to high street banks, will give you the best chance at finding the right deal to suit your personal circumstances. You should also investigate how long the remortgaging process is expected to take. After you have submitted your application, it’s common for the whole process to take up to 8 weeks, but good conveyancers can reduce this timeline significantly.

If, however, you choose to remortgage before your deal comes to an end, then you should be aware of the possible fees you could be charged.

By choosing to remortgage before your deal ends then your lender is likely to apply some additional fees called early repayment fees or exit charges. Though you may want to avoid these charges, remortgaging your home before your deal ends could save you money in the long run by reducing your monthly repayments.

Mortgage broker looking through remortgage files

Bank of England Base Rates

As of December 2021 the Bank of England’s base rate has increased from 0.1% to 0.25%, directly affecting banks, building societies and lenders. For homeowners with a mortgage, this can result in increased interest rates. Building society Nationwide has already begun increasing their rates over 200 mortgages with a rise of up to 0.45%.

Choosing to remortgage now, even before your deal comes to an end, could be the best option to lock in a fixed rate deal to avoid the initial rate rises. Find out more about how the rate rise could affect you here.

How can I remortgage to release equity?

Dreaming of a new kitchen or an extension? Remortgaging your home to release some equity could be the best option to fund your project.

Equity itself means how much value of the property you actually own. When you lay down a deposit of, for example 20%, you own 20% of the property, and the amount you own continues to go up as you pay back your mortgage.

If you’re lucky enough the amount of equity in your home can also increase without you paying it back if the value of your home has also gone up.

For instance, say you bought a home worth £300,000 5 years ago with a 20% deposit of £60,000 then you would have had to take a mortgage of £240,000. Since then the mortgage you owe has reduced to £200,000 but the value of the house has increased to £350,000.

This now means the amount of property (equity) you own has increased to £150,000 and your loan-to-value (LTV) has now changed from 80% 5 years ago to 58%.

Now that you have a lower LTV rate you can get a remortgage with lower repayments, or choose to remortgage for a larger amount opening up the equity in your house. This could leave you with £20,000 to play with and use to improve your home.

If you want to check how much equity you have available on your house then a local Mortgage Advisor should be able to calculate this for you for little to no charge.

Releasing equity doesn’t always have to be used to improve you home. You can use the funds however you wish but it is advised that you speak to a financial professional before remortgaging to ensure you are doing what’s right for your personal circumstances.

When is the best time to remortgage your home?

Aside from when your current deal has come to an end, there is no clear-cut time which is best to remortgage your house. However, as base rates rise and house prices increase, it could save you money to remortgage before your deal has ended to avoid the rate rise, or to improve your home using the increased equity in your house if your home has gone up in value.

Exploring all of the options available to you will help you find the right deal and once your application has been accepted, using a trusted conveyancer to keep the process moving forward, easing the pressure on you as they can ensure you complete on your remortgaging application in as little as 2 weeks. This is a great option for homeowners remortgaging to improve their house if work has already begun or is set to begin soon as they will have access to the funds required to pay contractors or builders.

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