Suitable Versus Unsuitable reasons to Remortgage
There are many good reasons for remortgaging, equally there are situations where it is not the best option.
The likelihood is you will benefit from remortgaging if:
Your current fixed rate is ending
Unless you secure another rate, you will default to the lender’s standard variable rate (SVR), which is usually a higher rate. On a SVR your mortgage payments will often increase. Remaining on a SVR rate is most likely not your best mortgage rate option.
The value of your home has increased
If your loan to the current value of your home has fallen, the increased equity may allow you to raise additional money to fund home improvements/ debt consolidation etc. Lenders will have specific maximum loan to value ranges for remortgage types.
You should think carefully before securing other debts against your home. There are other ways to manage debt such as free debt advice charities, you can find out more by contacting the Money Advice Service https://www.moneyhelper.org.uk/en these services may be more suitable for you.
You want to change your existing mortgage loan type
Changing your property use from residential to Buy to Let or vice versa, then a remortgage may be required.
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Remortgaging is unlikely to be suitable if:
Your existing mortgage has high early repayment charges (ERCs)
Although a remortgage is likely to result in significant monthly savings, the ERCs or exit fees if substantial can outweigh any direct savings from remortgaging. Honest, professional advice is crucial at this stage to determine financially what is best for you.
Your remaining mortgage debt is less than £50,000
If you are looking to do a straight £ for £ remortgage on an existing balance less than £50,000 is it likely we will advise you to secure a product transfer rate with your existing lender, as the fee associated with remortgaging to another lender may outweigh any saving benefits.
Your financial circumstances have been impacted negatively
If your financial circumstances have negatively changed i.e. loss or reduction in income, recent adverse credit, your ability to remortgage may be impaired. Honest, professional advice is crucial at this stage to determine financially what are the best options for you.
Your loan to property value is very high or you are in negative equity
A lender will not accept a remortgage application for any property in negative equity. Lenders will have specific maximum loan to value ranges for remortgage types. In these circumstances we would look at a product transfer rate with your existing lender.