If you’re a homeowner and you’re approaching the end of your current mortgage deal, you might be thinking about the next step – a remortgage.
A remortgage is basically a new mortgage that follows on from your existing deal. At the moment, it could be a good opportunity to get a better deal, because average mortgage rates are far lower than they ‘usually’ are. And that could mean lower mortgage payments for you.
Read this for a brief guide to remortgages in the UK.
Finding a remortgage
Your existing mortgage lender will probably get in touch with you when your existing mortgage deal is about to expire. They’ll tell you what deals they currently have available, some of which may only be available to existing customers (i.e. you).
However, it’s always worth checking what else is available. It may well be that there are other remortgage deals with other lenders that offer a better rate. Or you might want to switch to another type of mortgage (more on that shortly).
Some of the things you may want to look out for when remortgaging include:
- A low interest rate (compared with other available deals)
- A low mortgage arrangement fee (as this can potentially add a lot to your overall costs)
It may be difficult to get a remortgage that ticks both these boxes, so you might have to compromise on one or the other. Talk to a mortgage adviser if you’re unsure which deals are right for you.
Choosing the right type of mortgage
There are two main types of mortgage offered by UK lenders today.
On a fixed-rate mortgage, the interest rate will stay exactly the same for an agreed period of time (normally between two and five years), meaning your monthly mortgage payments can’t change in that time. You’d be protected against increases in interest rates, but you also wouldn’t benefit from falls in interest rates.
On the other hand, a tracker mortgage follows the base rate closely (so if it increases by 0.25%, so would your mortgage rate). These rates tend to be lower than the fixed-rate deals available at any given time. However, a change in your rate means a change in your mortgage payments, so you should only choose this type of mortgage if you’re sure you could afford an increase.