To Remortgage Or Not To Remortgage

Aug. 26, 2009 - PRLog -- In these hard times do you remortgage to get a better rate or do nothing and stay with your current lender after the end of a fixed  term interest rate on your mortgage, say two or three years, will mean that you revert to the standard variable rate is a question you need to ask yourself.

If the variable rate is relatively attractive, which it is at the moment you may not want to bother remortgaging. And if you have not built up much equity in your property, you may not be able to remortgage, as many lenders now insist on a minimum of 20 to 25%. But if you have a lot of equity in your property, you may well be able to remortgage onto a more attractive interest rate which could be better than the standard variable rate.

What if you have to remortgage to move house. In such a situation, even if your lender will allow you to transfer your home loan in theory, it will probably require a valuation of the property to ensure it meets its standards, with property prices falling so much in the past year, you could be hopeful.

Remortgaging needn't only occur when your mortgage interest rate comes to an end. Some people take out a new mortgage simply to save money on their monthly repayments. For example, you may take out a fixed rate mortgage only for the interest rate to plummet, leaving you stranded on a higher rate. Remortgaging to a more competitive rate in these circumstances may make financial sense. Bear in mind that remortgaging is not a cost-free process though. Your current mortgage may carry penalties or charges if you try to leave it early, plus there will probably be costs associated with the new deal, so factor all of this into your decision.

In the current economic climate with slowing house prices and lenders now charging higher interest rates, a remortgage should really be driven by need to do so. As a result of the credit crunch, a number of lenders pulled their larger loan-to-value (LTV - the amount lent as a percentage of the property's value) mortgages in spring 2008. All 125% mortgages were abolished, meaning that borrowers could no longer obtain loans for more than the property's worth. Although this wasn't good news for first-time buyers, it also reduced the chances of borrowers that were already on such deals would be able to get similar percentage loans when they came to remortgage. You may find that you need to build up more equity in your property before you can remortgage as most lenders will only offer a LTV of 80% to 85% at the moment for a better deal.

Lenders are being tighter with who they lend to and how much they lend given the current economic situation, so if you bagged yourself a good mortgage deal a couple of years ago, don't necessarily expect a similar rate this time round.

To summarize, to remortgage or not to remortgage, in my opinion as the author of this article I believe if you have enough equity in your property around 40% then there are many good deals to be had, but if you are like the majority who do not have enough equity in their property then the best route is to stay on the standard variable rate and benefit from low monthly mortgage payments until rates start to rise which is a question we are all asking.

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Mortgage Solutions is a whole of market broker whose ethics of the company is provide oustanding customer service. If you are looking for advice on fixing your mortgage or staying on the variable rate then Mortgage Solutions can help you.