Remortgaging may be an unknown financial option to some people. The UK housing market is still in overdrive with new price highs being recorded every month. A report published by Halifax said that the ongoing “race for space” among buyers continues to fuel the property market.
Halifax’s analysts also noted that “housing transactions and mortgage approvals remain above pre-pandemic levels, and the continued growth in new buyer inquiries suggests activity will remain heightened in the short-term.”
As interest rates rise across the world, remortgaging is an option you should be considering to ensure that your financial plan will continue to deliver the results you want. In this blog, we will examine how remortgaging can help you and why.
How many types of mortgages are there?
There are several types of mortgages available in the mortgage market. Selecting the right type of mortgage depends on your financial circumstances and, of course, your financial goals. Before submitting any mortgage applications or getting in touch with mortgage providers, we’d recommend speaking to a specialist who could give you qualified financial advice.
An experienced and qualified financial adviser will be able to review your mortgage options and guide you all the way to a beneficial mortgage deal.
Which are the basic types of mortgages available in the market?
Taking out a new mortgage with a different lender on an existing property is known as remortgaging. The remortgage process should not be confused with borrowing more funds from the lender you have already used in the past. Let’s see first which are the major types of mortgages available in the market.
Fixed-Rate Mortgages
Fixed-rate mortgages guarantee that your monthly payments will remain the same until an agreed upon date, regardless of changes in interest rates in the market.
For example, a fixed-rate period can be 2, 3, or 5 years long.
Tracker Mortgages
The value of a tracker mortgage fluctuates in tandem with the Bank of England’s base rate plus an agreed margin is the interest rate charged. There are ‘lifetime’ and ‘term’ trackers available, depending on the duration of the mortgage.
Standard Variable Rate Mortgages
When a fixed rate or term tracker period ends, the Standard Variable Rate (SVR) is the rate of interest that is typically charged. If you don’t want to switch to an SVR, you can usually switch to another fixed or tracker product.
How does remortgaging work?
As noted earlier, interest rates are on the rise. Some of the major banks have already hiked their benchmark rates as their boards have decided to tighten monetary policies and control prices and inflation.
Remortgaging is an option that you should perhaps consider as your current deal may not be the best you can be getting right now. Let’s see when you should be seeking professional advice for remortgaging.
Rising interest rates
For many years central banks had kept their interest rates at all-time lows. Now, this policy seems to be changing. As banks are likely to hike rates in the next months or years, such a move could affect your mortgage payments.
Whilst you should not be panicking, it would be best to pick up the phone and get in touch with your mortgage adviser who can give you an overview of the market and recommend some solutions that would minimise the consequences on your monthly budget.
The current mortgage deal is near its end
If your mortgage deal is about to end, you should be expecting the lender to put you on its standard variable rate (SVR). Most of the time the SVR is likely to be higher than the older interest rate; this means higher monthly mortgage payments for you and less consumer power.
We’d recommend scanning the market for remortgaging options with lower interest rates to avoid such problems. We’d also advise using the help of an experienced and fully qualified financial adviser to provide quality service and minimise stress and uncertainty during the process.
Are you considering overpayment?
Sometimes we get lucky by getting a raise or we inherit money from a source we hadn’t been expecting. With more funds available in your bank account, you may consider paying extra money to reduce the size of your loan.
However, there is a catch. Your mortgage agreement may not allow you to proceed with early repayment. If you are not sure about your contract’s terms, we’d suggest reviewing every term in case exit fees make remortgaging an unsuitable solution.
Would you like to borrow more money?
One of the reasons that property owners prefer remortgaging is that sometimes their lenders deny them another loan.
It’s possible to raise money at low-interest rates by remortgaging to a new lender. However, be sure to account for all fees to determine if this is the most cost-effective option.
Property prices rising
Property prices have skyrocketed in many countries across the world. If you are an owner, you could have seen the price of your home going up by 20 or 30% in some cases in the last few years.
As the value of your property rises, the loan-to-value (LTV) rate has likely gone down; this means that you may be entitled to a lower mortgage rate. Review the property market prices in your area and see if you can achieve a better mortgage deal to save funds for your other plans.
Rising rates make remortgaging an attractive option
Your current mortgage deal may not be ideal anymore for your needs. As central banks tighten their monetary policies, it may be good to review your financial plan; therefore, you should also review your mortgage terms.
As taking out a mortgage is a long-term commitment, expert advice would come in handy, especially if reading agreement terms seems complicated to you.
Review your remortgaging options with Holborn
Holborn’s property consultant team is on hand to help you adjust your financial plan to the new circumstances. Holborn hires only the most experienced and fully qualified financial advisers that know how to navigate the property market, thus helping you to save extra money you could use to improve your life.
Get in touch with our property team today by filling in the contact form, and one of our advisers will contact you to start exploring your options.