According to statistics released by the Council of Mortgage Lenders (CML) in March of 2016, there has been a significant increase in the number of remortgages granted by lenders. The figures showed an overall increase of 32% in the value of mortgages compared to a year ago and an increase of 35% in January 2016 compared the final month of 2015.
In January of 2016 alone, some £8.5 billion was advanced in remortgages by lenders.
With such a clear growth in the market, what is likely to make remortgaging worthwhile for you and what tips might be offered to help you decide?
- the principle of arranging a new mortgage with a more favourable rate of interest and other conditions in order to repay your existing mortgage is a relatively straight forward principle;
- remortgaging might be done because it saves you money (in a lower rate of interest charged), releases equity in the home you own, extends the term over which the mortgage needs to be repaid, or secures your home against additional borrowing;
- although the principle may be reasonably simple and straight forward, paying off your existing mortgage through remortgaging may take some time to complete and certainly calls for sound calculations of the costs involved and the savings you might make;
- in the first place, of course, you need to know and understand exactly what your current mortgage is costing – not simply the monthly repayments you are making, but the underlying rate of interest, the term of the mortgage (how many years it has to run), whether there is any flexibility in the way the mortgage works, and what penalty charge is going to be made if you pay off your current mortgage early (a so-called exit fee);
- if you know what it is you are hoping to achieve through a remortgage, the next step is to let your existing mortgage lender know that you are reviewing the current arrangements and thinking about making a switch;
- in response, your current lender may be able to offer more favourable terms or suggest another of their own mortgage products – potentially saving yourself some of the additional fees involved in moving from one lender to another;
- if you decide that the best course is indeed a remortgage, that is when the serious arithmetic starts;
- first you need to calculate how much you are going to be paying in interest over the remaining term of your existing mortgage;
- this total cost then needs to be compared not just to the cost of interest you are going to pay over the whole life of the new remortgage, but also add to this the cost of exiting the present arrangement – you are going to need to pay legal fees for setting up the new mortgage, a survey on the property offered as security, and almost certainly a penalty charge to your existing lender for exiting the current arrangements before the mortgage reaches its full term;
- if the sums show that you might indeed be saving money through remortgaging, you might want to press ahead with the move.
Although the principle of remortgaging is relatively simple and straight forward you might want to keep these tips in mind when taking steps to repay your current mortgage with a remortgage.