Can you remortgage early?

When facing the threat of mortgage arrears, stress levels can be high and it’s not a good place to be in. One potential strategy that might offer a lifeline is remortgaging early. But can you remortgage early? The answer is yes, but there are several factors to consider and it may help you manage your financial obligations more effectively.

Understanding Remortgaging

Remortgaging involves switching your current mortgage to a new deal, either with your existing lender or a new one. This is often done to secure a better interest rate, release equity from your home, or alter the terms of your mortgage. While most homeowners consider remortgaging at the end of their mortgage term, it is possible to remortgage early.

Reasons to Remortgage Early

1. Lower Interest Rates: If interest rates have dropped significantly since you took out your mortgage, remortgaging early can help reduce your monthly payments and overall interest cost.
2. Avoiding Mortgage Arrears: If you’re struggling to meet your current mortgage payments, remortgaging to a more affordable deal can prevent you from falling into arrears and facing potential repossession.
3. Debt Consolidation: Remortgaging can provide a way to consolidate other debts into your mortgage, often at a lower interest rate than unsecured loans or credit cards.
4. Accessing Home Equity: If your home has increased in value, you can remortgage to release some of the equity, providing you with much-needed funds.

Factors to Consider

1. Early Repayment Charges (ERCs): Most fixed-rate mortgages come with ERCs if you repay or switch before the end of the fixed term. These charges can be substantial, so it’s crucial to calculate whether the savings from a new deal outweigh the costs of the ERC.
2. Valuation and Legal Fees: Remortgaging involves some upfront costs, including property valuation and legal fees. Some lenders offer deals that cover these costs, but it’s essential to confirm this.
3. Credit Score: Your ability to secure a new mortgage deal will depend on your credit score. If your financial situation has deteriorated, it might be challenging to find a better rate than your current mortgage.
4. Loan-to-Value Ratio (LTV): Lenders will assess your LTV, which is the ratio of your mortgage to the current value of your home. A lower LTV often secures better rates. If house prices have fallen, your LTV might be higher, affecting your remortgaging options.

Steps to Remortgage Early

1. Evaluate Your Current Mortgage: Review your current mortgage terms, including any ERCs, and calculate the potential savings from remortgaging.
2. Check Your Credit Score: Obtain a copy of your credit report and ensure there are no errors. Improving your credit score can enhance your remortgaging prospects.
3. Compare Mortgage Deals: Use comparison tools and consult with mortgage brokers to find the best remortgage deals available.
4. Consult with Your Lender: Sometimes, your current lender may offer competitive rates to retain your business. It’s worth discussing your situation with them before making any decisions.
5. Apply for a New Mortgage: Once you’ve found a suitable deal, complete the application process. Be prepared for the lender to conduct a property valuation and credit check.
6. Complete the Switch: If your application is successful, your new lender will pay off your existing mortgage, and you’ll start making payments on the new deal.

In Conclusion

Remortgaging early can be a viable option for UK homeowners facing financial distress, offering a way to reduce monthly payments, avoid arrears and access home equity. However, it’s essential to carefully weigh the costs and benefits, considering factors like early repayment charges and your current financial situation. Being proactive and seeking professional advice, you can make an informed decision that safeguards your home and financial future.

If you’re contemplating remortgaging as a solution to your financial challenges, thorough research and planning are key. Consult with mortgage advisors, compare deals and understand the implications to ensure that remortgaging early is the right step for you.

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