How To Get The Best Remortgage Deal

Remortgaging when your current deal is coming to an end can be a stressful experience. Knowing when to remortgage and how to get the best deal can be the difference between paying more or less.

There are several factors to consider before you remortgage your current deal, such as whether to stick with your current lender, if you face any early repayment charges if you remortgage too soon, any fees associated with setting up your new deal and how much you still owe.

In this article, we’ll look at all of these factors and more to help you get the best remortgage deal when the time comes to renew your deal.

Start the process before your deal ends

Knowing when the initial term of your mortgage ends is important because if it expires and you don’t remortgage, you will be moved onto your lender’s Standard Variable Rate (SVR). These rates are typically higher than other deals and could see you burdened with rates of 7.5% to 8.5%.

Most lenders will let you lock in a deal six months before the end of your current one. The benefit is if the Bank of England base rate rises in July, for example, after you’ve locked in a deal in April, you’ve got the cheaper rate secured. Although the inverse does apply, so there are pros and cons to this approach.

As a general rule, you should consider remortgaging six months before your current deal ends to avoid ending up on an SVR. This is important because you typically have three to six months to accept an offer from a lender. So, this gives you plenty of leeway to shop around and consider your options before committing to a deal.

Expect the process of getting a remortgage from start to finish to take 4 to 8 weeks.

Check your credit report

Lenders will still check your credit report before remortgaging, so it’s worth taking a look before you jump into anything. This is especially true if you haven’t checked your credit report for a while, or since you took out your original mortgage.

A credit report is one of the main ways lenders investigate whether you have a good repayment history and financial discipline to pay back a remortgage deal.

Checking your credit report before you look for a deal allows you to check whether you need to rectify anything before you approach lenders.

Remortgage at the right time

Technically, you can remortgage whenever you want. However, most lenders won’t let you remortgage within six months of taking out a mortgage and it isn’t always the best idea as remortgaging too soon can result in charges. An example of this is an early repayment charge (ERC), which might apply if you remortgage before the end of your term.

One scenario where you’d end up paying an ERC would be if you remortgage to a new lender before the end of your current term. The lender charges a fee of 1% to 5% of the remaining amount owed when you remortgage to a new deal. This is because they will not receive the expected interest from your old deal.

Checking the fine print of your current deal is essential before you decide to remortgage. Find out whether you face any charges for remortgaging early and what they will be. If you don’t face charges for remortgaging early, you can be more flexible with remortgaging onto a better deal when interest rates fall, for example.

Find out how much you still owe

It can be hard to keep track of your mortgage repayments and what you still owe, but this is important to know so you can get a good deal when you remortgage.

Contact your lender and ask how much you need to pay to clear the mortgage on a certain date, such as 1 June. This allows the lender to take into account any repayments you have to make between now and then. This will also give you an idea of whether it’s worth making overpayments to clear your mortgage by this date.

The benefit of knowing exactly how much you owe is that you won’t end up with a shortfall or paying more on your remortgage than you need to. If you know how much you owe, use our remortgage calculator below to get an idea of what your new repayments could look like.

Consider the type of mortgage

The type of mortgage you’re on can make a big difference to your repayments. Depending on your finances and the economic situation when you remortgage, switching to a different mortgage product might be beneficial and save you money.

Here are some of the most common types below and some pros and cons of choosing them:

• Fixed-rate mortgage: A fixed-rate mortgage locks in an interest rate for the whole term of your mortgage. The benefit is that you know what your repayments will be for the whole term, which is beneficial if interest rates rise. But, if rates fall, you will be stuck paying more in interest for several years until your term ends or you remortgage.
• Tracker mortgage: A tracker mortgage follows the Bank of England base rate. When the rate rises, so will your repayments and vice versa. This means your repayments can increase or decrease several times during your term. They’re good when interest rates are low, but if they rise you’re looking at higher repayments. You can get a lifetime tracker mortgage, but this is risky and could see you paying much more interest than you otherwise would.
• Discount mortgage: A discount mortgage is a type of variable-rate mortgage. You’re on the lender’s SVR but you receive a discount of a set percentage for a certain period. So, if your lender’s SVR is 5%, your discounted rate could be 3.5%. The advantage of these mortgages is that you pay less than the SVR and this rate can fall, meaning you can pay less if it does. However, if rates rise, you’ll see an increase in your repayments.

One thing to consider before remortgaging is your loan-to-value ratio (LTV). The lower your LTV, the cheaper your remortgage will be. Interest rates tend to drop when your LTV drops below 90%, 80%, 75% or 60%. So if you can make extra payments to get below one or more of these these levels before you remortgage, you might end up with smaller repayments.

Use our LTV calculator below to find out what your ratio is before you remortgage.

Shop around for the best deal

The easy thing to do when you remortgage is to accept what your current lender offers you. But that can mean you’re missing out on better deals elsewhere on the market that could see you making lower repayments.

Here are a few things to consider when shopping around for the best remortgage deal:

• Use comparison sites: Websites such as Compare The Market and Money Supermarket are perfect for getting a handle on what types of deals are out there. This will give you an idea of the current interest rates being offered and whether they are better or worse than your current deal.
• Consider mortgage terms: As well as the price of the mortgage, you need to consider the length too. Two-year fixed rate deals are typically cheaper but you will have to remortgage again soon after, while a five-year fixed-rate offers more security. But the risk is that rates decrease and you’re stuck with higher repayments for longer.
• Use a broker: The advantage of using a broker is that they have an overview of the market and can access deals that aren’t available online or direct with lenders. They’re also able to your circumstances into consideration and ensure you don’t waste time with lenders who won’t lend to you. Speak to one of our OMA® Verified Experts to find out how you can the best deal to suit your needs.

How a mortgage broker can help

If you’re considering remortgaging soon, it’s a good idea to speak with a mortgage broker who specialises in remortgages. They can walk you through the process of remortgaging, consider your circumstances and potentially help you get a good deal.

Just call us on 0808 189 2301 or make an enquiry and we’ll do the rest. We’ll simply ask for a few details and from there can find the broker to suit – it’s completely free and there’s no obligation, just the chance to find the right lender with expert support at your side.