Michael and Sarah are a married couple who moved into their new home three years ago. They approached us about getting a remortgage along with the added aim of funding some home improvements. Michael is a furniture designer and Sarah is a self-employed interior designer who works as a sole trader.
Michael and Sarah’s current fixed rate mortgage deal was due to end in five months and they had just over 25% equity in their property. They were looking to secure a new fixed rate as soon as possible so that they could ensure they did not default onto their lender’s Standard Variable Rate (SVR), which would have seen their current monthly mortgage costs almost double – quite a hike from their current fixed rate. At the same time, they also wanted to extend their kitchen, a project they’d not been able to tackle since moving to the property when all of their savings were taken up by the initial costs of moving.
A remortgage application was arranged with a new lender on a much better rate than before and a mortgage offer, valid for six-months, was then issued. This meant the new mortgage could effectively be secured at the better rate but it would not need to start until after their current fixed-rate ended (ultimately ensuring there were no early repayment charges to pay on the current mortgage).
An extra £25,000 was also organised for the home improvement work as part of the process, which went into their bank account upon completion of the remortgage.
The benefits of this remortgage were as follows:
- Repayments on the new mortgage were about £500 cheaper per month
- They were able to release a chunk of equity for their new kitchen extension
- They avoided paying any early repayment charges on their out-going mortgage.
Overall, Michael and Sarah were delighted with the outcome of their remortgage and the extra £500 per month would definitely come in handy as part of their longer-term plans to start a family.
So when is the best time to start looking for a remortgage?
If you are approaching the end of your initial fixed rate or tracker deal, most lenders will keep a remortgage offer open for at least 3-6 months. However, you should always check the period being stipulated by the new lender to ensure that you don’t lose out or have to pay any extra costs to redeem your existing mortgage.
Here at Mortgagez we contact our customers at least six months before the date of their current mortgage deal expiring in order to allow enough time to start the ball rolling and secure the best option as early as possible. The benefit of this is if mortgage rates rise during this period then the lower rate has already been locked-in for you. If you are currently on your lender’s Standard Variable Rate you should really look to review your remortgage options immediately.
Final thoughts
If you are looking to remortgage to fund some home improvements, we think it’s worth doing your sums first to see if it’s feasible and that you are comfortable with the revised payments. Sometimes, it is possible to reduce your monthly outgoings and, at the same time, release some equity for home improvements but this is certainly not always the case.
If you need further help deciding what’s best for you please speak to one of the fully qualified Mortgage Advisers at Mortgagez. It won’t cost you a penny for our service when you go via our portal and we will be with you every step of the way – helping you with your application from the very start and chasing it through to completion.
YOUR HOME MAY BE REPOSSESSED IF YOU DON’T KEEP UP REPAYMENTS ON YOUR MORTGAGE
Any guidance and/or advice contained within this document is subject to the UK regulatory regime and is therefore restricted to consumers based in the UK. Any technical or regulatory information contained within this document was correct at the time of producing it but as it may be subject to change it should not be exclusively relied upon when making a financial decision. The Financial Conduct Authority does not regulate advice on Buy to Let mortgages.
Article written: Dec 2020 141220 MZ000151
