Ok so a lot of us are at home complaining of boredom whilst others are all overwhelmed still at work. Some of us are employed and concerned about “job safety” and those of us who are self-employed thinking how the hell am I gonna get through this.
The truth is right now you may not be thinking about a mortgage. With job security at an all-time low and not having an end in sight, right now might not seem like the best time to consider remortgaging your home. That said, what is also true is that this will come to an end at some point and things will not be the same again for all of us. Will you look back and say “I wish I had done……….” Maybe yes, maybe no.
For some people remortgaging right now might be the best opportunity to get an amazing deal at “record low-interest rates”
Obviously there are many things to consider.
First thing’s first: What is a “Remortgage” and how does this differ from alternatives such as “Product Transfers” and “Rate Switches”?
Essentially a remortgage is a new mortgage to pay off the one that you currently have. Generally, this is with a new lender offering better rates or features than your current one.
If you choose to stay with your current lender and do not change the terms of the loan, you might opt for a “Product Transfer” i.e. a transfer to a totally new product(Type of mortgage), or a “Rate Switch” (to the New Interest rate available for your loan).
There are advantages and disadvantages of both as is always the case. Finding out which is best for you takes a bit of digging but is worth the time to ensure the best deal for your individual set of circumstances.
Why should you remortgage?
There are many reasons you should remortgage:
The main one is where the interest rate you are on (or will soon revert to in the case of a “fixed rate”) is higher than those now available to you. Coming to the end of your fixed deal means you will revert to your lender’s “Standard Variable Rate”. Generally, this is not the best rate available. With interest rates at such low rates at the moment, there really are some good and unprecedented options available.
Your house may also have gone up in value which means your “Loan to value” has changed. Again this means you are able to apply for more favourable interest rates.
You may also want to consolidate some debt. I imagine that with the current situation this might be a consideration for some moving forward. A warning though….It is important to remember that if you consolidate your debt in your mortgage it is then “secured” on your home. This needs to be considered carefully. You may actually end up paying more interest over time, so if you are considering this, please be careful and ensure you take advice. There are calculators which will work out if you are better off consolidating or not. Sometimes it’s advisable, sometimes not.`
When may it not be advisable to remortgage?
As in anything in life, there are two sides to the coin. There are many situations where you will be better off staying with your current lender and considering a Product Transfer or Rate Switch. Especially at this time where there is much uncertainty. Those who are in the following situations may find a remortgage less favourable:
You are in a fixed deal and have a large “Early Repayment Charge” that will obviously have to be paid when you redeem your current mortgage and go onto the new one. Some of these are large, some not so. If you have a good mortgage broker they will let you know if it is still worth paying it considering what you may have to gain.
You are already on a great deal with your current lender. Simple: stick with it.
If your income has dropped you may not fit the affordability for a new lender. Switching rates with the current lender is a simpler process and the usual affordability checks are different and often less stringent that of a new mortgage.
The status of your credit has changed. I think this is likely to be the biggest thing coming out of the Coronavirus situation. If your credit becomes “impaired”, new lenders will not look at you so favourably.
So you can see that it isn’t just as simple as saying “I want to remortgage to the best rate”. There are lots of things to consider for your particular situation. However, in this current time, you may thank yourself hugely for exploring your options with remortgaging.
It's important to be aware that, at this particular moment in time, banks and building societies are changing their products and rates almost daily in response to the market. Some will, unfortunately, lose out on this (for example, some banks have removed all mortgages above 75% Loan To Value which means that first time buyers without a 25% deposit would not be able to get a mortgage at all). However, as is always the case, “nature abhors a void” and the gaps that are currently open will be filled by other lenders looking to get into that space.
So in answer to my initial question:
Should I remortgage right now?
I really do think that, for many of those who have a mortgaged property, right now could represent a great opportunity. If your job is secure, your credit has been managed and you are coming to the end of a “fixed-rate” now is a great time.
That said, there may be many of you reading this who don’t quite fit into this very lucky bracket, but even if that is not your situation there may be options available to you too.
My advice:
Get your mortgage documentation out, have a read through it and think “could this be something to consider”?
Most remortgage offers (and often Rate Switches too) last 3-6 months so once you have an offer, it can normally sit there in preparation for your current product coming to an end. This is also true of rate switches.
So, the answer to my initial question is, annoyingly, “it depends”. However, there are definitely opportunities here and if just one person uses this information to get the best out of their situation I will consider this worth writing.
If you have any questions at all please do not hesitate to get in touch
0330 333 5065 or paul@railwaymortgages.com
