If you’re looking to save money and mulling over re-mortgaging right now, you’re in good company. Mortgage Advice Services provides a comprehensive list of all factors and crucial pointers when re-mortgaging here.
Crucial Points when Remortgaging from the Current Housing Market in the UK
The number of home-owners re-mortgaging has reached its highest level for almost a decade, new figures have revealed. On top of this, statistics from trade association UK Finance show that demand for long-term fixed rate mortgages has increased 38% in the last year.
This is due to a couple of important factors.
The first is that lack of confidence has caused the housing market to become flat in some areas of the country. More people are deciding to sit tight (and to invest in home improvements) rather than risk a brand new home purchase right now.
The UK housing market’s 2018 sluggishness is likely to continue too. This is despite the Government’s stamp duty cut, according to evidence from The Royal Institution of Chartered Surveyors (RICS).
The second is that there’s uncertainty as to what the Bank of England will decide on the base rate this year. But many experts agree there will be a rise.
Michael Saunders, a member of the Bank of England’s rate-setting committee has made it clear that home buyers could see the base rate rise to 2% before long.
The 7 Crucial Points when Remortgaging to Watch Out For
So if you’re considering remortgaging, here are some factors or crucial point to help you decide what could be the best re-mortgaging product for your circumstances. MAS deems the following 7 crucial pointers when re-mortgaging your home to be of the utmost importance.
- Why should you re-mortgage? Basically for two reasons. You already have a mortgage and are looking to move lender to get a better deal. Or you’ve paid off your debt, you own the property outright but now want to borrow money against it.
- Will you save money? That depends on your current deal. But if your mortgage is your biggest outlay, then reducing its cost is likely to be your most effective way to save your outgoings.
- Has your current deal come to – or is approaching – its end? It could be a fixed deal, a tracker or a discount product. If it is, you’re heading towards a Standard Variable Rate (SVR). In this case, there are almost certainly cheaper re-mortgaging products out there you could opt for.
- Should you choose a fixed rate mortgage? Again this depends on you, your horizons and how sure you are you won’t need to move in the term period. Fixed rates are the most popular type of mortgage product right now with most borrowers wanting to lock into attractive deals ahead of the predicted interest rate hikes. You’d need a crystal ball to know how much interest rates are going to change over the coming years. Most people’s incentive in taking out a fixed rate re-mortgage is because it provides certainty over how much their mortgage payments are going to be during this period. So they can have peace of mind and budget accordingly.
- If you fix, how long should the term be? Consider your circumstances. There’s a big range of options available at the moment. You could lock down your mortgage rate for anything from two to 10 years. The thing to remember is that the longer you fix the term, the higher the interest rate will be. Fixing for longer could mean a big saving though as rates go up and you’ve arranged your mortgage rate at the current low rates.
- Will you be accepted for a re-mortgage? You might think that because you’ve had a mortgage in the past, it will be straightforward. But lenders are more cautious today and they have to be. New rules from the FCA came into effect in 2014 to ensure home-buyers face tougher checks on their ability to repay. You’ll also need a good credit score. One other thing, you’ll require decent equity in your property. Ideally you will want to borrow under 95% of its current value. To get the best deals, less than 60% is what you should aim for.
- Should you use a mortgage broker? If you’re capable, your circumstances are straightforward and you have the time to review all the options out there available, then no you don’t need to use one.
The Conclusion – Get Expert Advice when Remortgaging
Martin Lewis, of Moneysavingexpert.com, however, feels that for most people, a qualified and FCA regulated mortgage adviser will get you the best deal. He says: “What you really want to do is get the best deal from across the market. That’s where a good mortgage broker can help. I often favour sorting your finances out yourself. But as mortgages are such a big single transaction, getting professional help can be a boon.”
Why? “A broker should be able to quickly source a relevant product that fits your credit history, offer an extra layer of protection if things go wrong, and carry more clout with lenders to ease acceptance on otherwise unobtainable mortgages.”
Expert advice is recommended when re-mortgaging. You can contact us at MAS any time you have issues or need advice on remortgaging here.