If you are looking to remortgaging your home, even if you are remortgaging with bad credit, it is going to matter when you do it. Ideally you should be aiming to remortgage your home when the introductory rate on your agreement is about to end, not before.
Most mortgages have an introductory offer and these will normally for the first 2 or 5 years of the mortgage. Once this period is over, the rate will go back to the lender’s standard rate. This SVR (standard variable rate) will nearly always be higher than the one currently being paid.
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Introductory rate offers are there on remortgaging products in order to lure homeowners away from their current providers, much in the same way that banks will try to entice current account holders away from other banks by offering cash incentives to switch. These offers can be a great opportunity to save, potentially, hundreds of pounds every month for the next 2 to 5 years.
However, that being said, there are drawbacks to remortgaging such as some potentially large fees which could mean the whole thing ends up being more expensive – especially if you are remortgaging with bad credit. This is why it is important to do your homework. Mortgage brokers can advise you too, so make use of their expertise if you need to.
Why would you remortgage?
The why, and the when, of remortgaging is going to depend on a lot of things, and they will vary depending on the individual. As a rough guide though you should start looking around for deals roughly 3 months before your current agreement is set to come to an end. This will give you time to compare a good selection of offers. Also, remember that the transition takes around a month.
If the BoE (Bank of England) level of interest rate has lowered since taking out your fixed rate mortgage, you may not want to remortgage at all unless you can get a great variable rate deal somewhere else.
If, however, the rate has gone up during your fixed rate term then you will most likely be after a another fixed rate deal which may keep you on a low rate.
Essentially, the main idea behind remortgaging is to keep paying at the introductory rate for as long as you can which can save you a lot of money of the life of the deal. Obviously, this is not going to apply if you need to remortgage with bad credit but you may still be able to get a reasonable deal under those circumstances, all things considered.
How long does remortgaging take?
Switching over to a new lender can take around a month but sometimes it can take upto 2. For instance, if you are staying with your current lender and you’re just switching products then it should only take about a month. With that in mind you should start looking around when you have roughly just 3 months left – this will provide you with plenty of time to calculate costs and consider your options.
Should you remortgage before the the current deal is over?
Generally speaking, the best answer here is a resounding no. The reason for saying this is that you may be charged fees for early repayment, and these fees can take quite the chunk out of any gains you would have made. Lenders do want to draw you in with attractive offers, but they also want to tie you to into them.
Go over the terms and conditions of your current agreement before paying it off and see if there’s mention of early exit fees. The goal though, ultimately, is to leave one deal at its natural conclusion, right as the new one starts.
Remortgaging: Is it worth it?
Well, unless you remortgaging with bad credit, it can save you thousands. In the end, it only takes your current interest rates to rise by 1% and you can end up paying hundreds more each month. Bank rates themselves can be volatile too, so remortgaging at a discounted or fixed rate can provide some peace of mind.
Bank rates can go down too though, which can make switching to a new agreement entirely pointless. As an example, let’s say you are currently on a fixed rate deal of 4%. Now imagine that the bank rate has gone down and now your current lender’s rate is 4.5%.
You will need to figure out how much, if anything, you are going to save by switching products / lenders on a similar deal. There are almost certainly going to be fees to consider also, and once you have added everything up you may find yourself in no better a position than you are in right now. Even if you do end up saving money, the fees will mean that you may not actually see this for months, possibly even years.
Should you stay with your existing lender or switch to a new one?
Sticking with your existing lender is usually easier and cheaper (if you are remortgaging with bad credit you may have no choice but to go elsewhere) because generally less paperwork to get through.
The whole process is usually faster too and can be done in under a month, your current lender might also place discounts on some remortgaging fees. That being said, a new lender can sometimes offer even better deals. Banks are competing with one another constantly, vying for new customers attention. They want your business and are very often willing to offer great deals, especially with mortgages, to get it.
It is always a good idea, important even, to look around and see what other lenders are willing to give you even if your current lender is already offering a good all round deal.
Whatever you decide to do, shop around and compare deals from a good selection of lenders. Try to use the information that you gather to your advantage to get the best deal possible for you, and for your bank account.