By Pete Mugleston, Mortgage expert and MD at www.onlinemortgageadvisor.co.uk
With the housing market still very much open for business during the third national lockdown, it is still possible to re-mortgage your home. During the pandemic, it’s not always clear how to go about doing tasks that once seemed simple, so below are some of the key things to bear in mind if you’re planning to re-mortgage in the coming weeks.
Why should you re-mortgage your home?
Everyone has their own reasons to re-mortgage a property. There are plenty of different circumstances where re-mortgaging your property is the best thing to do at the time for yourself and your family, for example to save money and reduce your monthly repayments or take advantage of a drop in interest rates. Even though there have been a significant number of re-mortgaging options withdrawn since the start of the pandemic, there are still hundreds more options available and products are returning to the market every day, so it’s worth having a look around at what’s there for you at the present time.
You may also want to re-mortgage if you spot a better deal elsewhere, or to release equity from your property for a significant monetary purchase. The process may also be needed to release funds for some home renovations on your property, including extensions or conversions. These improvements can not only enhance your living space, but also increase its value in the long term, so is a clever investment.
It may take longer than usual
Mortgage lenders are increasingly busy during the pandemic; they are facing a huge demand when it comes to mortgage payment holidays and other general concerns facing homeowners, seller and buyers attempting to pivot around the ongoing restrictions and lockdowns. Therefore, if you’re looking to re-mortgage it would be best to start the process sooner rather than later to allow time for the bank to work on your application before your current product’s introductory rates period runs out, as it will most likely take a longer time than usual. Different lenders will have different response times though so it’s a good idea to look around at your available options, or consult a mortgage broker to see if they can help in saving you time. A good mortgage broker will be able to do the majority of the legwork for you, ensure your paperwork is correct the first time and ensure that you’re introduced to the right lender for your specific needs.
You do not have to change lenders in order to re-mortgage through the pandemic. If you re-mortgage with your current lender, this is called a product transfer which can include switching loan amounts, new rates and the general terms of your mortgage. However, you can still change lenders if there is a better deal to be had elsewhere. Changing lenders will require you to hire a property solicitor or conveyancer who will handle the legal aspects of the re-mortgage for you.
High loan to value mortgages
A high loan to value (LTV) mortgage is where the mortgage lender offered you a high proportion of the property’s value and asked for minimal deposit. Although many mortgage lenders withdrew their high LTV products when the pandemic began, things have since improved and it may be possible to take advantage of the low interest rates if you apply for your re-mortgage through a mortgage broker.
Saving money by re-mortgaging
With the Bank of England setting interest rates at 0.1%, you might be able to save a considerable amount on your monthly mortgage payments by taking advantage of the best re-mortgaging deals available to you. Reducing monthly mortgage payments is one of the most popular reasons that people choose to re-mortgage their property, however people also re-mortgage to release equity or to repay outstanding debts. With many different options available, in most cases you’ll save the most money by switching to a new deal rather than moving onto your lender’s Standard Variable Rate.
Paying off debts
You may want to re-mortgage so you can pay off any debts you have, but be aware it is not usually the most cost-effective way to do so. The interest rate is lower, but you’ll likely be paying it off for a longer period of time, compared to a short fixed loan.
Re-mortgaging on furlough
It is possible to re-mortgage whilst on furlough if you’ve already taken out a mortgage on your property and it’s coming to the end of its fixed term. It should be fine to stay with the same lender and switch mortgages if you’re on furlough as long as you’re not applying to borrow more money from the banks. Having said that, it will be more difficult if you wanted to switch to a new lender, so it’s advisable to seek professional guidance from a mortgage broker if you’re thinking of doing that.
Consult a mortgage expert
It’s worth emphasising the value of expert advice during the pandemic, or during any other periods of economic uncertainty. With things in constant flux, navigating the mortgage landscape is more difficult than ever without guidance from those of us in the know. Even if you’re in a position to pay more than your monthly payments, or you just want to pay off and settle your mortgage, some lenders don’t allow you to do this. If you consult an expert, they’ll be able to independently look at your situation and advise you on different lenders and re-mortgaging options that you have available.