Everything you need to know about remortgaging - and how to get the best deal
by Derin Clark
In just the same way you can often get a better broadband, insurance, and gas and electricity deal by switching when a fixed term contract ends, homeowners could be financially better off remortgaging when their fixed rate mortgage deal ends.
At the end of a fixed rate deal, a lender will normally automatically move the borrower onto their standard variable rate (SVR), but this rate can often be higher than what you could get on a fixed rate deal. You do not have to stay on the SVR and instead can lock into another fixed rate deal by remortgaging either with the same lender or a new one.
For most mortgage borrowers it makes financial sense to remortgage once a fixed rate deal has ended, so to help you get the best deal, here are some of the factors you need to consider when remortgaging, as well as when remortgaging may not be the best option.
What to consider when remortgaging
For many people, mortgage repayments are one of their biggest monthly expenditures, so it is important you take the time to ensure you remortgage with the right deal.
First you need to consider what term length you want to remortgage into. The two most popular terms tend to be either two or five years, but you can get terms lasting three years and some for as long as 10 years.
Usually, the rate on a two year fixed deal is lower than that on a five year fixed deal, but in recent years the gap between the two rates has narrowed. As well as this, a five year rate fixes repayments for a longer term, which protects you in case rates rise. On the other hand, if rates fall further - although they are already competitively low - you could miss out on the lower rates.
Another factor to consider when remortgaging is the product fees the new mortgage deal charges, as well as valuation and legal fees. Although legal fees would likely be significantly cheaper than when you first bought the property, there are still legal charges when remortgaging. As well as this, a valuation needs to take place when remortgaging. Some remortgage deals will offer free valuation fees as an incentive, while some may also have the incentive of no legal fees or help towards legal costs.
Overall, it is important to ensure that the reduction in monthly repayments gained by remortgaging is worth the cost of product fees, legal fees and valuation.
If you are unsure about whether to remortgage or want help with choosing a remortgage deal, it may be worthwhile speaking to a mortgage broker who will be able to provide advice specific to your circumstances.
When remortgaging may not be the best option
There are times when remortgaging may not be the best option. One of these is if you are planning on moving house soon. Often, if you move house you cannot transfer your mortgage to the new property, so when considering the costs of remortgaging as well as having to pay exit fees to end your fixed rate deal early, it may not be worth the cost of remortgaging.
Another time remortgaging may not be a good option is when you are in the final few years of repaying your mortgage. Product fees and costs with remortgaging could add thousands of pounds extra onto your mortgage, which depending on how little is left to repay, could add to the debt unnecessarily.
If you are considering remortgaging, you can see all the available deals on the Moneyfacts.co.uk remortgage chart and calculate how much the new repayments would be by using this mortgage repayment calculator