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When should I re-mortgage?

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When should I re-mortgage?

It's a key question that we get asked by lots of clients. And it may surprise you to know that there are many times when remortgaging might be the best financial option. Some of them may be obvious, but others are less so.Our guide will give you a good idea as to whether now is the right time for you to rethink your mortgage, but if you're not sure if your individual circumstances mean remortgaging is the best option, give us a call and we will be happy to give you some initial advice.

Amor Financial are based in the heart of Tunbridge Wells and offer mortgage services throughout Kent & Sussex 

The end of your fixed-term mortgage

If your introductory mortgage rate is coming to an end, it’s almost definitely worthwhile thinking about remortgaging to secure a new fixed-rate that is below the Standard Variable Rate (SVR).The maths on this can be quite compelling!

For example, if you have a £500,000 mortgage fixed-rate for five years on 2% and your return to SVR (assumed at 4.99%, but the figure varies from lender to lender), it will cost you in the region of £800 more a month, ie, £9,600 a year.

The maths may be even more convincing if you managed to secure a fixed-term mortgage in October 2017, when rates hit all-time low. That rate, however, is coming to an end within the next few months and, with the party over, now’s a key time to seek expert advice on what you could do next. Moreover, the disparity between your fixed rate and the current Standard Variable Rate means the financial reason for remortgaging at the end of your fixed term is probably stronger than ever.

Re-mortgaging even if you are selling your home

While there are still a lot of nerves in the housing market, June’s RICS UK Residential Market Survey1 has indicated that this is bottoming out, potentially influenced by the decision to extend the deadline for withdrawal from the EU till the end of October. The same reports suggest that negative trends in agreed sales, prices and new instructions have also showed some signs of easing. While still hardly an ideal vendors’ market, the current picture is at least better than it has been for a while.

If you decide to sell, you will of course need a new mortgage when you purchase your new property. But while you are in your existing home, it can still make sense to remortgage if you come to the end of your current fixed-term finance. Even if your house sale goes smoothly, it can still take several months from putting your house on the market to completion, and that could add up to several thousand pounds in additional mortgage payments, depending upon the size of your loan. If you know you are selling, it’s important you don’t get tied into a new finance deal with heavy early repayment penalties, but there are a number of mortgage products on the market that offer both flexibility and a more favourable interest rate than the Standard Variable Rate

Remortgaging to clear debts

Think carefully about this one. Yes, you can take out a mortgage to consolidate debts – to pay off not only what you owe on your home but to clear any other debts you may have racked up, for instance on credit cards. However, in some instances it will take you far longer – and cost you far more – to pay off those debts than via other methods, rendering the option a false economy. This is an instance when sound financial advice particularly comes into its own.

Remortgaging because of a change in life circumstance

​Are you moving in with a new partner and considering renting out your own existing property as a buy-to-let option when you do so? With expert advice you could benefit from the plethora of buy-to-let remortgaging options currently available, possibly benefiting from tax benefits too. Meanwhile, there might even be a plus side to the hassles of divorce: moving a mortgage into one name again might give you the opportunity to remortgage, possibly to your benefit. Please note that if you own a property and buy another, there is currently a Stamp Duty surplus charge of 3% Please take advice from a tax professional in this instance.

And key points to bear in mind:

You may have to pay an early repayment charge to your existing lender if you remortgage.
Most forms of Buy-to-Let mortgage are not regulated by the Financial Conduct Authority.

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