For many, the idea of remortgaging before the end of the current mortgage deal is an absolute last resort – and sometimes with good reason. Lenders can often impose substantial fees on borrowers who decide to leave an agreement early.
However, sometimes remortgaging before your current deal ends is the best option. Whether driven by external or internal forces, remortgaging shouldn’t be something to fear.
In this article we discuss:
Remortgaging to avoid rising interest rates
Remortgaging to consolidate debt
Remortgaging after a separation
Don’t fear your finances
Remortgaging to avoid rising interest rates
Following the boom in house buying during the pandemic, many buyers are now coming towards the end of their fixed-term mortgage. We’re finding that more of our clients are getting in touch six to 12 months before their current agreement ends to discuss their options.
We can’t say for sure how interest rates will change over the next few months, but it’s almost certain that interest rates will continue to rise. This means that if you are due to renew your mortgage, your monthly payments will likely increase.
If you can remortgage now without incurring fees – or if the fees are nominal – it may be worth it to secure a lower rate, ahead of likely future rate rises. Remember, our advice is totally free, so we can help you determine the best way forward. It is worth noting that many lenders change their products ahead of any official announcements regarding interest rate changes, so it pays to seek advice as soon as possible. We recommend getting in touch with us at least three to six months before your deal expires.
Remortgaging to consolidate debt
As the cost-of-living increases, more and more people are turning to credit cards and borrowing to help with everyday expenses. Naturally, however, as costs rise it may be more difficult to pay off credit cards. For many, the idea of increasing the mortgage they’ve worked hard to pay off is an unhappy thought, however using your mortgage to consolidate debt can help to free up funds, lower monthly repayments and sometimes reduce interest.
Case study:
Lewis and Rachel* came to us in January 2020 when they needed help with remortgaging their home for debt consolidation.
Lewis was previously in the forces and upon his transition out of service, the couple began to use credit cards while he was job hunting. Unfortunately, the use of the credit card began to spiral and even when both were earning good incomes, they struggled to meet their minimum card payments. This led to a chain reaction of using more credit cards to pay off others.
Eventually, Lewis and Rachel had 16 credit cards between them and were both understandably very anxious. To try and resolve the credit card debt, the couple opted for a second charge loan on the house. While this helped for a short while, it wasn’t the long-term solution they required.
By the time Lewis and Rachel sought our support, they were both working and earning a considerable joint income. However, due to the level of debt, they were only just making the minimum payments each month on the mortgage, second charge, credit cards and car finance.
The total level of debt that we consolidated for them came to £128,000. Combined with their existing mortgage, this gave them a new total mortgage of £223,000, taking them to a loan to value ratio of 84.9%. This posed a problem for most lenders; however, we were able to find a provider that was not only able to accommodate them, but also offered a competitive rate in doing so.
We had to increase their mortgage to around the level it was when they first bought their home, but in doing so we were able to save them £4,200 their monthly outgoings. Overall, this resulted in a saving of £9,970 in interest over the term. This has allowed them to live a more stress-free life, begin to save and got them out of the vicious cycle of credit card debt.
Your property is often your biggest asset. If you are struggling with debts and want to speak about consolidation, make sure you speak to a mortgage adviser, as well as talking to your current provider. We will give you fee-free advice and access to the whole of the market and may be able to secure you a better deal than that offered by your current lender.
Remortgaging after a separation
The breakdown of a relationship is a stressful time and can impact your finances in many ways. If you have purchased a property with your former partner, it can be difficult to secure the funding you need now that you are the sole earner. Often, when faced with this situation, people will contact their current lender and – if they are told no – will assume other lenders will say the same.
This is exactly why it is so important to speak to a mortgage adviser with access to the entirety of the mortgage market. Different lenders will have a different appetite for risk, and what is an absolute no from one lender could be a competitive offer from another.
Case study:
Hayley* got in touch with us after separating from her partner. She was hoping to be able to keep the house they had bought together as she did not want to move away from the area.
Hayley discussed this directly with her existing lender, but they were unable to lend her the amount required (£83,000) to take the mortgage on by herself. Having investigated her options, we were able to source a lender that would offer the amount required and secure a remortgage with a better fixed rate than she currently had.
Additionally, we were able to identify significant protection shortfalls that existed now that this was a single income household with a young dependent. Using the cost savings from the remortgage, we were able to ensure that in the event of Hayley’s death or an earlier critical illness, the mortgage would be able to be paid off in full.
Hayley was initially very anxious about having to sell her home and move her daughter away from her friends. However, with our help guiding her through the process she was elated. Not only was she able to keep her home but her family was protected.
Don’t fear your finances
Money can be a difficult thing to discuss, particularly if you find yourself in a situation you never expected. It’s so important that you seek help if you need it – as soon as you can.
Remortgaging may not be right for you, but our advisers will be able to talk you through all of your options, and when it is the right move, we’ll help you to get the best deal.
To discuss your mortgage options, please get in touch.
*We have changed the names in these case studies in order to protect the privacy of our clients.
