Could Now Be The Right Time To Remortgage?

It seems there is a far greater willingness on the part of lenders to pass on the recent base rate cuts to people who already own their own home, rather than to those trying to get their foot on the residential ladder. With this in mind should homeowners ask themselves whether now might be the right time to remortgage their home?

Mortgage lenders are making it harder and harder for first time buyers to get their first property; Nationwide recently decreased its loan-to-value (LTV) to 75% from 90% on some deals so that borrowers looking for a fixed or tracker rate have to find a deposit of at least 25%. Meanwhile, the last 125% mortgages also came off the market. As a result, those trying to make their first step onto the property ladder, face tough times ahead; but for those who are ready to take the next step, things are looking pretty good.

There are plenty of reasons why you might want to remortgage; one of which, of course, is to get a better deal. With the mortgage market as unsteady as it is, and rates as high as they are, it might seem like a crazy time to do it, but figures from the BBA this week have shown that re-mortgaging actually rose this month. It seems that because mortgage approvals are down, lenders have to really compete for the less risky borrowers, i.e. those who already have property and have proved that they can pay; and as a result competition for mortgage switching is high.

So, how can you take advantage of this situation if you are a homeowner? Well, if your mortgage's introductory deal or fixed rate is about to end, you could save by re-mortgaging with another lender. This would mean you avoid going onto your current lender's variable rate, which is bound to be higher than the one you have been paying – even just one percentage point could mean a significant increase in your monthly repayments. There are many lenders trying to get new business at the moment and who are offering attractive remortgage rates, which could reduce the amount you are paying.

Better still, if you can easily afford your current monthly repayment, switch to a cheaper one, but continue to pay the same amount; if you overpay, you can pay off your mortgage quicker, which could save you a considerable amount of money in the long run and leave you mortgage-free sooner than you thought.

If you are finding it tough to budget around the base rate changes, it might be an idea to remortgage onto a fixed rate deal. That way, you know where you are each month. If you get offered a rate that you are happy with, you might want to stick with it – some lenders are offering some great long term fixed rate deals over 5, 10 and even 25 years, which could really help your financial peace of mind.

One of the other big advantages of a remortgage is the capital you could release. If you have had your property for a number of years, it is more than likely that it has significantly gone up in value. House prices might have dropped a bit in recent months, but that is nothing compared to the rise in prices over the last 10 years. If you have seen your home rise in value, you could remortgage up to the new value, and then use the extra money to buy another property. If you bought a buy to let, for example, you could have yourself a tidy monthly income too - and with all those first time buyers struggling to buy, there are plenty of potential renters out there!

Overseas property is also a good investment; there are so many new up and coming areas, like Bulgaria, Cape Verde and others; you could see your money go far, and similar to a second property in the UK, you could rent it out and get a regular income. Or you might want to invest the extra cash, save it in a high interest account or even go crazy and buy a car or splash out on an exotic holiday.

Obviously, remortgaging isn't for everyone; if you are on a good mortgage deal - stick with it. But if not, you might find that the current crazy mortgage market could just work out well for you.

About the Author

Adam Singleton is an online, freelance journalist and keen gardener. He lives in Scotland with his two dogs.