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Important steps to consider when remortgaging
If your mortgage term will soon be coming to an end, it is important to plan your next move well in advance so you can secure remortgaging finance at the best terms. The imminent expiry of your mortgage contract presents an opportunity to review your mortgage loan in the light of possible changes in the market, and in your personal circumstances and requirements. Even if there are still one or two years of the term remaining, you can still make some important decisions which will help to lower your mortgage interest rate.
Especially with a long-term mortgage set up with a ten-year term, the interest rate and other conditions available under alternative mortgage forms can fundamentally change over such a timeframe. Even after just a few years, we are seeing large interest rate fluctuations, so anyone planning to remortgage should always look closely at the current market in order to evaluate the terms offered by their existing lender. Get an overview here which shows the interest rate trends for the different forms of mortgage over the past years.
MoneyPark can guarantee you an entirely independent consultation in which we comprehensively review the current market and offer mortgage comparisons which take account of interest rates and other mortgage conditions.
Comparing different remortgage offers
When remortgaging, it’s important to assess your existing lender’s new proposals in the context of prevailing market conditions. If their remortgage offer incudes an attractive rate of interest in comparison to your existing mortgage, this may mean that other financial institutions could offer you even lower interest rates. Clients should always bear in mind that their previous mortgage has proven their reliability and creditworthiness, which makes them a more attractive prospect for new lenders. Many tend to forget this when negotiating a remortgage.
Switching to another lender at the end of your mortgage term does not incur a financial penalty. With any planned change involving a fixed-term mortgage it’s also important to observe any specified notice period. The deadline is often three or six months, and a notice of termination is not only useful when you plan to switch, it also strengthens your negotiating position with your current lender.
Costs will be incurred if the mortgage does not complete its agreed term. When this happens, lenders charge an early repayment penalty based on the remaining unexpired term and the market interest rate. This compensates the lender for the loss of earned interest capital due to the early termination of the mortgage contract. Whether such a step is worthwhile for a mortgage holder must always be individually assessed. In addition, from time to time the land registry will also charge a fee for recording details of a new creditor.
Possible remortgaging options
When remortgaging, a client can remain with their existing lender if the offer is right and the business relationship has been satisfactory. Alternatively, it would also be possible to remortgage with the current lender and opt for a different mortgage product. Market trends and the borrower’s circumstances and requirements can all be subject to change – for instance, a lower mortgage loan can lower the risks associated with a flexible interest rate mortgage.
However, if market comparisons indicate that attractive offers are available elsewhere and your current lender cannot match these competitive terms, then switching to a new lender is often the most sensible step. Moreover, where there are several mortgages with different terms, it is also possible to distribute them across different financial institutions, provided that the borrower's note is apportioned accordingly.
When planning to renew a mortgage contract, a ‘forward-fix’ option allows you to ‘freeze’ an interest rate up to 12- or even 24 months before the end of the term, thus securing your remortgage arrangements well in advance. This approach is useful if it is anticipated that interest rates will rise before the end of your present mortgage.
Current mortgage rates
The displayed interest rates are the best rates currently available. Your personal interest rates may vary depending on LTV, affordability, mortgage amount and the location of the property.